"The crisis is over," a gung-ho Finance Minister announced while unveiling a Medium-Term Economic Framework (MTEF). He has said it before. I don’t consider stock exchange as a true barometer of the economy. But the Finance Minister quotes its ups in jubilation and rejects downs as anti-government propaganda.

In the first week of December last year, when the stocks suffered their steepest move southwards and the rupee depreciated to the surprise of a bewildered Prime Minister, the Finance Minister pooh-pooed the notion of an economic crisis, claiming that there was no external financing gap in the fiscal year 2018-19 and all economic fundamentals were improving.

In a press briefing earlier in November, he declared, "Our balance of payment crisis is over as our gap on the external front of $12 billion has been filled. Saudi Arabia has already provided $6 billion and the remaining is under discussion with China."

Remember in August 2018 as the finance minister-in-waiting, he had warned, "The crisis is so severe and requires measures so urgent that no option can be ruled out. In the ninth month of dithering, with two mini budgets failing to reduce the fiscal deficit and assistance from three friends and massive depreciation forcing intensive care, he says that "Now we are in the stabilisation process." He expects growth to follow the conclusion of this process. The length of this process will coincide with the IMF programme that is likely to be for three years.

So the IMF option that could have been taken on the very first day in office with all the goodwill that a new baggage-free government carries, is being exercised now. The attempt to live without the IMF, which a few of us economists believed was the right thing to do, has come a cropper because of the inability to draw up a domestically oriented pro-poor austerity programme.

Half-hearted effort was made to cut down the $ 5-6 billion of the inessential imports, fully capitalise on the "Imran effect" on remittances and drastically slash down the unproductive expenditure of the government. A number of governance reforms that cost a pittance but enhance productivity manifold are still on the drawing board. It is no secret now that the government functioned on as-and-when basis. There was no economic plan. Nor is there a plan now. The hurriedly prepared MTEF is more than a set of wishful projections by the mandarins of the finance ministry. There is no coordination with the Planning Commission where a growth-oriented 12^th five-year plan is under preparation.

Now with the likely programme of the IMF, growth will certainly take a hit. All IMF programmes are about pulling back the drivers of growth. The already reduced public investment will be scaled down further. Revenue adjustments and interest rate hikes will adversely affect private investment. With the slowdown of the economy, aggregate demand will shrink. Stock market, property market, construction and supermarkets are already feeling the pinch leading to lay-offs.

While the government’s stop-go policies and U-turns, such as the latest tax amnesty scheme have shattered the private sector confidence, an activist NAB has given birth to bureaucratic inertia. The punishment for not doing anything is nothing compared to doing something. This attitude of the bureaucracy has made its own contribution to shatter the confidence of the investors. Little wonder that the large-scale manufacturing experienced a negative growth of 2.3 per cent in the July-January 2018-19.

As a matter of fact, the latest IMF forecast gives a taste of things to come. For the current year 2018-19, GDP growth is estimated at 2.9 per cent, well below the Pakistan target of 6.2 per cent. Bhutan and Nepal do much better than Pakistan. The IMF estimate of 2018-19 is also lower than the forecasts by the World Bank of 3.7 per cent and by the Asian Development Bank of 4.8 per cent.

In its Monetary Policy Statement issued on March 29, 2019, the State Bank also lowered the projected growth rate in the current year, "domestic economic activity experienced the brunt of the stabilisation measures implemented thus far. In particular, Large-scale Manufacturing (LSM) declined by 2.3 percent during Jul-Jan FY19 against 7.2 percent growth recorded in the same period last year. The latest available estimates of major crops also depict a lackluster performance by the agriculture sector.

The slowdown in commodity producing sectors has downside implications for growth in services sector as well. Similarly, a deceleration in consumer demand and capital investments, reflected through a cut in development spending and deceleration in credit for fixed investments, indicates a moderation in domestic demand. In this backdrop, the real GDP growth is projected to be around 3.5 percent in FY19."

Indeed, the IMF is projecting continued recession with growth rates of 2.8, 2.7 and 2.6 per cent during the likely programme years of 2019-2020, 2020-21 and 2021-22. These growth rates are barely above the annual population growth of 2.4 per cent. Obviously, these projections are without reform in the IMF sense. This also means that the reform undertaken by the government, namely, the rupee depreciation, utility and petroleum price adjustments, fiscal adjustment and the interest rate rise are not enough. Nor is the policy regarding state enterprises, confusion regarding circular debt, practice regarding State Bank autonomy and transparency regarding Chinese debt. Pakistan will have to "do more" of a different kind.

With a stagnant growth per capita and rising inflation, the IMF programme will make stagflation official. It will also resolve the dilemma faced by the PTI government: Should it accelerate growth and provide the promised five million jobs and reduce poverty, or should it control inflation? It attempted to do both, but could achieve neither.

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When the present government took over in August 2018, the rate of inflation was 5.8 per cent. Nine months on, the average for the period is 6.8 per cent and for March 2019, it is 9.4. Thus, inflation is high and rising. Growth is tumbling down and with it, employment. The IMF faces no such dilemma. It will focus single-mindedly on inflation, which is forecast for the full year at 7.6 per cent. For 2019-20, the forecast is 7 per cent and it is 5 per cent thereafter.

Despite massive depreciation, exports have risen by a mere 0.11 per cent, while imports have gone down by around 8 per cent. The IMF will press for further depreciation and tariff reform. Fiscal deficit approaching 7 per cent of GDP will have to be brought down to 5 per cent at the end of the programme. The economy under Asad Umer was going nowhere. Now it is going to the dogs.