Meandering trajectory

The latest iteration of Pakistan’s monetary policy update is a continuation of more of the same by the government: dragging feet over the measures agreed with the IMF for the completion of the ninth review of a billion-dollar bailout package. Or, should we say, delivering just enough to keep the Fund interested but never going the whole hog to actually meet its criteria. The 100-bps policy rate hike is no doubt a move in the right direction, but the magnitude of the hike is short of the 200-300 bps hike the market expected, or the Fund desired. There is little doubt that Pakistan’s economy has slowed down to almost a snail’s pace owing to a combination of high inflation, administrative curbs on imports, devastation wrought by last monsoon’s cataclysmic floods, and headwinds from the international market including the war in Ukraine. But the trajectory of the monetary policy clearly suggests that the government is still not worried about growth. Nor is it concerned about high levels of inflation, at least for now. Its singular focus is on the IMF programme. Inexplicably, however, the government seems to have taken a circuitous path, meandering through the measures one tiny bit at a time. The 100-bps hike is certainly a move in the right direction. Whether it is enough, however, is quite another question. The wisdom of this approach is known to Finance Minister Ishaq Dar and Prime Minister Shehbaz Sharif.

In any case, the Fund programme now seems fairly certain to trickle in at some point, although not urgently. Was taking the edge of urgency off the IMF programme the government’s intention all along in taking this deliberate approach? Who knows, especially with Dar at the helm. Irrespective, there is no doubt that this has been the ultimate result. Pakistan is still afloat, although just with the nose above water, after months of the Extended Fund Facility (EFF) going on a hiatus. All foreign debt service payments due over this period have been paid

off or rolled out. Happier tidings are in train. Pakistan’s go-to bilateral lenders are warming up to the idea of lending a hand just one more time. The hard times will eventually pass – as hard times always do. The State Bank hopes to meet its mid-term inflation expectations over the next eight quarters. People are already at the end of their wits fighting to keep their families fed. For them, eight quarters translates to 24 bills for each utility, 24 rent payments, and 24 months of provisions, which is an inordinately long way to go amid this tough economy. But mortals’ travails have never moved the powerful – nor will they.