THE sceptics may have their doubts about a ‘miracle turnaround’ in Pakistan’s fortunes after the government grabbed a last-minute stand-by loan from the IMF, but the markets have been quick this week to cash in on the euphoria.

The dollar fell sharply once trading resumed after the holidays, collapsing like a punctured balloon; stock market activity heated up like it had not in years, with speculative investors eager to get their hands on whatever they could; gold prices registered a sharp decline; and fresh inflation readings — although unrelated to the IMF deal announcement — indicated that the pressures that had built up within the economy might finally be showing signs of easing.

Had Pakistan really stumbled back onto the path to prosperity over the course of a long weekend thanks to just one loan deal? That’s what the government, at least, would have us believe.

Experts and analysts, on the other hand, are still warning of the underlying risks imperilling Pakistan’s economic prosperity. Global credit ratings agencies Moody’s and Fitch on Monday reminded the world that Islamabad still needs to pay back $25bn to creditors this fiscal year — a sum which is more than seven times what it officially has in its pocket at the moment and much more than the $3bn the IMF has grudgingly agreed to lend it over the course of the next nine months (which remains subject to approval by its board as well as Islamabad meeting the stringent conditions that will likely be laid out before it as a prerequisite for loan disbursements).

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The same day, data released by the Bureau of Statistics showed that exports had dropped 19pc in the month of June compared to the previous year, marking the 10th straight month of a drop in export proceeds. The trend, if it persists, will only worsen difficulties in financing the current account.

Therefore, the question: are we celebrating too early? The smart money seems to think so. While the ‘positive trigger’ from the IMF deal has been welcomed by the stock and foreign exchange markets, the high spirits will not last.

Both forex and stock analysts have warned that what we are seeing is a temporary bonanza, not a turnaround in their respective markets’ fortunes. There is now a broad consensus that till the fundamentals are fixed — ie, till Pakistan embarks on a structured plan to reform the economy and fix its underlying imbalances — nobody can breathe easy.

And how long must we remain in this purgatory? With an election coming up, the most painful measures will likely be put off for another few months for the new government to inherit. It is a shame that, with so much at stake, we are still not sure of what comes next.

Published in Dawn, July 5th, 2023