Close on the heels of the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB) have, within days, came down on Pakistan, warning it of dire times ahead unless it conducts large-scale economic reforms.
The ADB in its latest outlook on South Asia notes that with 1.9 percent annual growth outlook, Pakistan is pulling down the region that has shown fair economic prospects. Sri Lanka has negative growth prospects, but it has shown definite signs of recovery, unlike Pakistan.
The three global lenders analyse that the national elections for which Pakistan is preparing hoping to end its political turmoil, promise no economic panacea for the foreseeable future since successive governments have avoided making hard decisions.
To get the economy to a point where it is no longer considered a disaster will require “steadfast and consistent implementation of policy reforms” including all of the IMF’s harsh conditions. But, that is not all. Pakistan will also have to ease import controls, which would bring another wave of devaluation and foreign exchange stress, and perhaps the biggest ask, a “smooth general election” to help restore confidence. But, given the limited policymaking space, even a clean election may not be enough to turn things around,” ADB says.
The World Bank gave a candid warning for the upcoming government to make choices while making it clear that international lenders and development partners could only advise with international experiences of successes and some financing but hard choices and course-correcting decisions could only be taken within the country, Dawn news reported (September 23, 2023).
The global lenders also look at the grim social conditions in Pakistan as a result of wrong economic choices, profligate living and corruption. “It is also facing a ‘silent’ human capital crisis: abnormally high child stunting rates, low learning outcomes, and high child mortality.”
The World Bank also advised “a shift from wasteful and rigid public expenditures benefiting a few, towards tightly prioritised spending on public services, infrastructure, and investments in climate adaptation, benefiting populations most in need.”
Pakistan is on the brink of crisis where it should decide to remain a laggard with 40 per cent population living below the poverty line under elite capture and policy decisions driven by strong vested interests of military, political and business leaders or change course to take off for a brighter future.
Last week, after meeting visiting interim Prime Minister Anwarul Haq Kakar, IMF Chief Kristalina Georgieva’s message to Pakistanis was to collect taxes from the wealthy. It shined a light on the country’s inequitable tax system, which is the primary source of almost all of its economic woes.
Pakistan dodges such advise. Avoiding a comment on what he discussed with the IMF chief, Mr Kakar was less forthcoming on the gist of his brief discussion with Ms Georgieva, characterising the meeting as “constructive” and “focused on mutual commitments”, Dawn (September 24, 2023) noted.
Kakar’s focus, instead, was on the importance of unlocking USD 10 billion in pledged donations from around the world to aid the country’s recovery from devastating floods. He stated that they were “trying to ensure that the amounts promised and pledged to us are dispersed to Pakistan and are spent on those affected by the floods.” Despite the substantial release of funds by the world community, large parts of flood-hit Pakistan have received no relief since the floods devastated in 2020.
Pakistan has conducted 23 large-scale borrowing exercises with the IMF since 1958. Three-time Prime Minister Nawaz Sharif, last week lamented that his country was going around “with a begging bowl”. Successive governments in Pakistan have blamed the previous regimes for economic mismanagement and followed the same policies, without heeding advise from those who lend money.