Prime Minister Shehbaz Sharif is “hopeful” of inking a deal to revive a stalled International Monetary Fund (IMF) program this month, but ground realities don’t offer much optimism of this achievement. A key reason appears to be the global lender’s inflexible approach that the government blames on the ousted PTI government’s policies and the PTI blames on Finance Minister Ishaq Dar. Unfortunately, Pakistan, with less than $4.19 billion in reserves, cannot afford much dithering and has inflicted much punishment on an overburdened populace in a bid to secure a $1.1 billion tranche seen as key to unlocking further financial support.
Rubbishing the tall claims of the incumbent government upon its formation last year, the country’s estimated GDP for the current fiscal stands at just 0.29%, while inflation is at a record-high 38 percent. Islamabad also has significant debt, with almost all revenues earmarked for debt servicing, forcing any government to resort to even more loans just to keep the lights on. There are growing calls for a debt servicing, but Dar’s ego appears to consider this an unsuitable option, even as pundits keep ringing the alarms of impending default. In a recent report, the United States Institute of Peace (USIP) summed up the situation: “Amid skyrocketing inflation, political conflict between Prime Minister Shehbaz Sharif’s government and former prime minister Imran Khan, and surging terrorism, the country is facing the risk of a default due to its massive external debt obligations.”
Amidst everything else, Pakistan is still reeling from last year’s devastating floods, and political stability seen as key to restoring confidence in the country’s economy has yet to emerge on the horizon. According to USIP, the “inability of state institutions to reliably provide peaceful ways to resolve grievances has encouraged groups to seek violence as an alternative.” This occurs as the country is deeply polarized, rendering any viable political solution to the ongoing conflicts an aspiration that no one seem particularly eager to achieve.