WARNINGS of serious difficulties regarding the foreign exchange reserves are refusing to go away, despite repeated attempts on the part of the government to either ignore the alarm bells, or to minimise the problem. A serious situation has arisen as a consequence. Market players and other stakeholders are now asking in earnest: is the government actually aware that there is a problem? Or does it actually believe its own denials of any difficulties? Thus far, there are no signs of any latent understanding on the part of the government that the ship of state is veering towards dangerous waters, and that this is happening precisely when an election is approaching, and an interim government is about to take charge.

In interviews given on the record, Minister of State for Finance Salim Mandviwala has minimised the challenges on the reserves front, saying there are no difficulties in making repayments to the IMF, nor will any difficulties arise in the foreseeable future. The State Bank has also shied away from acknowledging that there may be difficulties ahead on the reserves front, preferring to say only that debt repayments are drawing down reserves and the consequent shrinkage of the import coverage ratio is, “unfortunately”, set to continue. Finance Minister Hafeez Shaikh is quiet, and giving no indications of busily working to redress any problems behind the scenes.
Neither the fiscal policy statement, nor the debt policy statements released by the finance ministry give any indications that Pakistan may end up knocking on the doors of the IMF during the year 2013. In fact, going by government pronouncements and body language, it would appear that all is well.

But the markets fear that the government is simply hitting the snooze button on the alarm clock again and again. The refusal to issue a clear-cut acknowledgement of Pakistan’s serious economic difficulties is now feeding confusion in the markets, and people are preferring to hedge all bets. The custodians of Pakistan’s economic stability are duty-bound to clarify where they see the ship of state going. If Pakistan’s is washed up on the doorstep of the IMF in the next six to eight months, today’s economic custodians will have some accountability to face. They will need to answer some basic questions. How did they fail to recognise the growing vulnerabilities within the economy? Why did they minimise the warnings being sounded by quarters such as the IMF, or other multilaterals? What will it say for their quality of mind, or their intellectual integrity, if their assurances of today are shattered on the rocky reefs of tomorrow?