Pakistan is heading for its 22nd bailout package from the International Monetary Fund (IMF) in the coming days. After months of negotiations, a staff-level agreement has been made which will further require the consent of the IMF board of directors to approve. The overall package is of around 6 billion US Dollars which will be provided in a time period of three years. How the economy is going to react to it and what cost of this IMF package will a common Pakistani bear, is yet to be seen. However, economic experts are skeptical about the harsh conditionalities that are agreed in the package.
The major point of contention is the decision of market-based floating exchange rate. Over the past few months, the rupee has devalued considerably, and it is believed that this decision will further erode the value of the rupee in the open market. The ultimate effect of a weak currency would be felt in all sectors of the economy as it will drive inflation which will decrease the buying power of the common citizens.
Another major cause of worry both the common man and industrialist alike is the decision to remove subsidies and increase the prices of utilities including electricity and gas. This decision is taken in the pretext to decrease the circular debt which has already reached a whopping amount of 1500 billion rupees. The government is claiming that it will not affect consumers who utilize less than 300 units per month however it will cost the industry dearly.
It has been said time and again by the government that painful reforms are needed to revive the economy. They argue that these structural reforms will put additional burden on the common man but it will eventually lead to growth and prosperity. We hope that is true, but the authorities should take steps in order to minimize the impact of these reforms on the downtrodden segments of society.