SHORT-TERM Saudi loans always come in handy for our rulers — be they from the PML-N or PTI — when there is financial trouble. Concessionary petrodollars and deferred oil payment facility from the kingdom after the PTI’s ascent to power in 2018 had gone a long way in assisting the new government avert a balance-of-payments crisis, just as a similar gesture helped the PML-N build up its foreign exchange reserves in 2014. The sum of $4.2bn ($3bn in safe deposits with the State Bank and $1.2bn in oil supplies on deferred payments for a year) lent by Riyadh during the prime minister’s recent visit to Saudi Arabia will also provide some respite to the government even as it loses its grip on the external sector. The Saudi announcement has somewhat eased pressure on the rupee which strengthened by 1.7pc against the dollar in the interbank market. It has also bought Islamabad some time in case talks with the IMF for the resumption of the suspended $6bn loan go on longer than anticipated. This much was evident from Shaukat Tarin’s relaxed tone at his Wednesday presser. Only recently, the finance adviser had been shuttling between Washington and New York to salvage the IMF deal.

Mr Tarin, who claimed that Pakistan had nearly reached a deal with the IMF and that there were just a couple of matters that remained outstanding and were under discussion, did not give out details of the talks with the Fund. Yet he indicated the ‘rationalisation’ of taxes to cover the revenue gap of Rs450bn the government has foregone to keep down domestic petroleum prices. Mr Tarin also blamed the harsh IMF conditions his predecessor had accepted to secure the last tranche of $500m from the Fund in March for his troubles with the lender. However, a cursory reading of IMF officials’ statements over the last few months shows that the lender is sceptical of Pakistan’s growth policies and does not approve of its fiscal spending plans and structural reforms — particularly in the energy and tax sectors — agreed in the original agreement. Another important condition relates to a significant reduction in imports to below FY19 levels to keep the current account deficit manageable. The problem is that none of this suits the government’s pre-election growth strategy. Essentially, the current impasse with the IMF amounts to differences over the government’s expansive fiscal policies. Revival of the deal appears uncertain unless these policies are reversed.

Published in Dawn, October 29th, 2021