How damaging was Dar’s eight month delay? 

LAHORE: There was a wave of relief that spread all over the country as soon as the news hit that Pakistan had signed an agreement with the International Monetary Fund (IMF). The deal was, of course, expected.

The rumour mill had already started churning out reports that a staff level agreement was near for the past week. All of the government’s actions indicated the same. The prime minister had met the director of the fund in Paris, the government amended and bulldozed the budget through parliament, and the State Bank hiked the policy rate in an emergency meeting. 

Yet even when finance minister Ishaq Dar said on Saturday that the SLA was expected in the next 24 hours, it was hard to believe. The people of this country have been fed the promise of “just around the corner” and the deal being “a few days away” for so long that nothing but concrete, ocular evidence was going to cut it. 

So when the agreement arrived and the IMF made a statement it was as if a nation that had been holding its breath in nervous anticipation could finally let it out. But in the midst of the relief and jubilation it would, one must be cautious not to forget why things got this bad in the first place. 

READ MORE: IMF deal comes through after eight months of will-they-won’t-they. What happens now?

This became necessary only because the agreement should rightfully have been struck eight months ago. The architect of this delay is none other than finance minister Ishaq Dar. 

After taking charge of the finance ministry in September, Senator Dar spent a good few months trying to prop up the rupee, stomp on inflation, and build a platform for the PML-N to build an election campaign off of. Any criticism of his actions or suggestions that they could derail the hard fought IMF agreement were met with macho posturing and aggressive chest thumping. 

All of the buffoonish antics ended when the IMF did not respond kindly to Mr Dar’s tactics. When it became clear there was no recourse, the government ended up blinking in the stare off and an IMF team arrived in Pakistan by February and left without signing a staff level agreement. From here on in the fund had the upper hand and ended up essentially dictating the country’s budget. 

“This should be taken as a lesson,” says Taimur Jhagra, former finance minister of KP. “If the deal had been completed 8 or 9 months ago there would have been far less economic anguish. Instead we spent this time watching silently as the productivity of our industries fell, our foreign exchange reserves were depleted, and our currency took a beating”.

“No one is going to be against the IMF deal, but there are some realities we must face. If you just reflect on the budget, the changes came as the result of the IMF’s arm twisting. Now, we need to make these changes to help Pakistan not just because we need to secure a deal with the IMF. If Ishaq Dar had not been dragging his feet, we could have negotiated the budget provisions better. Instead with such little time left the IMF gave us their cookie cutter solutions and we had no option but to accept. 

This seems to be the general sentiment among analysts. “In the last several months, Pakistan has adopted several measures to limit the decline in reserves amid prolonged talks with the IMF. The govt and regulators have opted for administrative controls such as prioritising imports, limiting repatriation and securing roll overs,” explains Amreen Soorani of JS Global. “From here, the IMF expects Pakistan to stick to the budget approved and take required steps to address energy related challenges, especially circular debt.”

“The delay has been very damaging, but it is good that this deal has come through. It clears the looming uncertainty about what will happen when the country is in the hands of a caretaker set up and preparing for elections while the forex reserves are falling,” says senior journalist Khurram Husain. However, he warns that there is very little room for missteps. “What we simply cannot do again is renege on the commitments made to the IMF”. 

In the days to come, the country will have to make some difficult decisions. Elections need to be called, the IMF’s board needs to approve the agreement, and a new government must enter a new IMF programme as soon as it comes to power. What we cannot afford any more of is chest thumping and playing with the fate of the economy for political expediency.