Repercussion of enigmatic governance

The PML-N government persistently rejected and rather ridiculed the sane advices of independent economists, the World Bank (WB), and International Monetary Fund (IMF) to take corrective measures for addressing the macro economic imbalances including the fast widening current account deficit, reckless borrowing and extravagance in non-productive public expenditure. The insanity of the federal government has forced WB to put on hold the soft loan woth $250 million for risk management which is though a human issue. Hence poor people affected by natural calamities will pay the price for the ridiculing international lending agencies, which the Planning Minister Ahsan Iqbal often does.

The World Bank was ready to give this policy loan for risk management but unwillingly decided to put it on hold because of non-serious attitude of the government to address the weakening macroeconomic situation. A review mission of the WB has not authorized preparation for the risk management loan to continue because Pakistan’s macroeconomic framework continues to face risks as the overall external account position has recently weakened further and foreign exchange reserves are under tremendous pressure. Even after acquiring fresh loans of $ 2.5 billion, foreign currency reserves have fallen below $ 14 billion. The Catastrophe Differed Drawdown Option (Cat-DDO) requires an adequate macroeconomic management to be approved, to which the present government is totally averse. The policy loan is a contingent credit line that provides immediate liquidity for the rescue, relief and rehabilitation of the people affected by natural calamities like floods and earthquake.

The Washington-based lending agency drew the attention of the government in the first week of October 2017 towards the worsening macroeconomic conditions of Pakistan. But the Planning Minister after attending the joint meeting of WB and IMF lambasted the “South Asia Focus Fall Report “in a function held in Pakistan’s Embassy in Washington with his usual verbosity hollow denial and cover-up of the bad governance of the government. The WB renewed its warning on 7th November 2017 for policy reforms aimed at macroeconomic management but the government turned a deaf ear to it. This convinced the international lending agency that the aid provided for disaster management will certainly be misappropriated and its benefits will not reach the affected people. Hence putting it on hold is the best option to avoid the wastage of financial resources by a government plagued by inefficiency and enigmatic governance.

The WB had also pegged $ 400 million aid subject to condition of passing and enacting legislation for debt control because heavy reliance on high interest bearing short term loans can create a repayment issue for Pakistan.  But the government did not accept this useful conditionality. The Bank in its report titled “Pakistan Development Update” comprehensively covered socio-economic issues in Pakistan. The report stressed for creating an “able tax administration and fiscal reforms for expanding tax net through direct taxes. Budget deficit will shoot up to 6.1 percent of the GDP against target of 4.1 percent. The current account deficit will not come down merely by the statements of commerce secretary Youna Dagha released to the media. It can be reduced by viable exports facilitation measures for the exporters associations. Chambers of commerce of commerce and industries has already given comprehensive proposals and recommendations.  It is time that government seriously considers the warnings of independent economists and international lending agencies and addresses the urgent issu4e of macroeconomic imbalances. The time is running out for the much needed fiscal and monetary reforms.