WHEN Finance Minister Ishaq Dar called on the World Bank Group president in Washington on Friday, David Malpass greeted him with a much-needed piece of advice. He asked Mr Dar to implement fiscal and energy reforms to stabilise the economy for sustained growth. Separately, senior IMF official Jihad Azour also advised Pakistan to move away from untargeted and wasteful subsidies, and instead, divert these resources to those who need them the most. There is nothing new in what the two international bureaucrats want Islamabad to do. The IMF and the World Bank have repeatedly told Islamabad to implement fiscal and governance reforms, and their recommendations have always been part of their support packages for the country that has faced repeated balance-of-payments crises, often exacerbated by natural disasters, in the last two decades. Sadly, no government has ever heeded such advice and has kept doling out huge subsidies for political reasons and allowed enormous tax exemptions to the powerful lobbies of businessmen and growers. Little wonder the nation has consistently run up an unsustainably large domestic and foreign debt to finance its bloated annual budgets.

With lender fatigue overtaking the world, both multilateral and bilateral financiers have grown wary of Pakistan’s unwillingness to undertake serious reforms to fix its economy and stop looking towards them for a bailout every few years. This fatigue was amply evident during the present government’s months-long negotiations with the IMF as well as ‘friendly’ countries for financial assistance. When the agreement was finally signed, many of us had hoped that the authorities would have learnt their lesson and that efforts would now be made to put our house in order. But then, the ruling PML-N brought in Mr Dar to head the finance ministry. The first order he signed pertained to a large populist cut in the petroleum levy in violation of the IMF agreement, citing the stress of floods on the economy and the inflation-stricken people. How the Fund is going to react to this, we will know when it starts the next programme performance review in November. However, the statements of the two Bretton Woods officials clearly indicate their subtle disapproval of Mr Dar’s divergence from the agreed terms of the programme. If Pakistan is to progress, we will have to implement a prudent fiscal policy and implement politically tough structural and governance reforms. That is the only option on the table, at least for now.

Published in Dawn, October 17th, 2022