Ensuring the bailout

It would be tempting to look at the IMF’s meetings with political parties with scepticism. It would be tempting but not wise. First, the context: after an excruciating long wait – exacerbated by unnecessary dithering by a government that had little to zero room to indulge in such whims and fancies – Pakistan and the IMF finally signed a Staff Level Agreement (SLA) worth $3 billion on a nine-month Stand-by Arrangement (SBA). With that done and dusted, the government had expectedly proceeded to paint this as some sort of unprecedented achievement which would have been amusing had it not come at the cost of even more inflationary nightmares for the people of Pakistan – mostly due to the indecisiveness regarding the bailout. The IMF, however, is seeing things in more minute detail and has chosen to reach out to major political parties in the country. Naturally, this has led to a variety of reactions: from glee (by the PTI) to outrage (by some within the coalition government). On Friday, IMF representatives met with PPP and PTI leaderships – in the PTI’s case the meeting included former prime minister Imran Khan. The rationale for the IMF seems to be to ensure that all political stakeholders are on board the new lender-supported programme. Both the PPP and the PTI have reportedly expressed support for the bailout deal.

The IMF’s overtures to the political parties have been seen as a ‘rare’ occurence of the lender reaching out to a country’s political parties other than the government. But the reasoning may not be as unique as it has been painted. Contrary to the claims by some within the PTI that the meeting represented the IMF seeing Imran Khan’s popularity as a reason to talk to him, economists and financial experts point out that this is due in main to the fact that the agreement comes right when a change of government is looming – the next nine months of the SLA potentially falling in the lap of three governments: the current coalition government, a potential caretaker government and the next elected government. It is not hard to understand just why the IMF would want all possible political parties to be onboard a bailout that has already taken months to reach. Lest we forget, there have been rather dodgy attempts already to ‘derail’ the IMF deal: the August 2022 audio ‘leaks’ of former finance minister Shaukat Tarin and the PTI’s finance ministers from the Khyber Pakhtunkhwa and Punjab governments come to mind immediately; the leaks were seen as an attempt by the PTI to sabotage the IMF loan programme.

Pakistan’s economic landscape has long struggled with challenges – fiscal deficits, a fragile balance of payments, and low economic growth. The IMF has been a constant recourse amidst years of bad economic policymaking. In recent months – given the political polarization and messy economy – there have been calls for the implementation of a Charter of Economy among major political parties so that the country can finally embark on sustainable economic policies. Through such collective decision-making, political parties can lay the groundwork for an economy that attracts domestic and foreign investments and leads to much-needed sustainable growth. A comprehensive approach – the IMF’s expertise, financial aid, and policy guidance with the political stakeholders’ commitment to ensuring stability in economic policy – should be the way forward for a country whose people cannot possibly be asked to sacrifice more by a rentier elite. It is time our political parties decided that they can play their political games but not use economic decisions as weapons in this political limbo.