Will Pakistan’s Economy Improve After the IMF Loan?

[VCheng]

Let's weight and see how this government will separate the wheat from the chaff, provided if they will able to secure their term.

We will soon know. There is no rush.

 

[pak-marine]

The Pakistan economy is going through some hard times and it is due to receive financial support from the IMF in the following weeks. The fiscal year 2018-2019 did not work how the PTI (Pakistan Tehreek-e-Insaaf) government expected, with most of the economic indicators well below their estimates.

GDP much lower than anticipated

Real GDP growth for the ongoing fiscal year dropped to 3.29%, well below an already revised estimate of 5.4%. The provisional GDP expansion was initially expected to come at 5.8% but the incumbent regime constituted a committee that revised downward the estimates.

Agriculture, manufacturing, and the construction sector, which had been the main drivers for growth until last year, performed well below their estimates. In US dollar terms, the Pakistan economy shrunk to $291 billion this year, as compared to $315 billion in the previous fiscal year.

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Source: pixabay.com

Alt text: Pakistan economy 2019

The budget deficit is expected to reach new highs, estimated at 7.6% as a percent of the GDP, due to expenditures overrun.

Trading (not just online through FINQ or other brokerage companies) is expected to suffer and the only hope lies in the financial aid which is due to being received from the IMF, one that could have a meaningful impact on the government’s ratings.

$6 billion from the IMF

PTI’s government will receive a $6 billion loan from the IMF in the next few weeks, as it literally has no place to turn for financial support. The incoming financial assistance will be one of the potentially bad implications for the government in Pakistan.

Imran Khan, the country’s prime minister, had built a campaign discourse against international institutions like the IMF, and now, due to his team’s lack of knowing the country’s limits, he needs to accept help from the very institution he condemned.

The International Monetary Fund is in a better position in the negotiation process, and for the next few years, it will be able to implement an economic policy that will hardly be under government’s control.

Whether the government will manage to survive the rise of inflation and unemployment is still uncertain. However, the IMF program must put the economy back on its track, so the country won’t need new assistance three years later when the bailout package ends. In the meantime, uncertainty is expected to increase as pressure will be high on the current PTI government.

Seems unlikely Its linked to FATF and both IMF and FATF will push pakistan to take tough decisions which are technically impossible in the current geo political climate that will result in increasing volatility in the pakistani markets

 

[Humble Analyst]

It is a long road and it will take perseverance

 

[khail007]

We will soon know. There is no rush.

In-Shaa-Allah.

 

[Nilgiri]

Pakistan regular people (say 90 - 95% folks in population) work hard...and will likely work harder and will tighten belts (of already narrow waist) because they have no other choice....and things will be imposed on them from above like a fresh load of bricks. They are like regular people anywhere in the world in such matters.

It all mostly comes down to the Pakistan elite/elitist/govt people (5 - 10% folks)...will they acknowledge and take stock of deeper realities (IMF fresh brickload is really not that much for them..it just joins the queue of loans+costs that varied in intent and results)?

Will they work/organise/learn/do smarter things (since they mostly really dont know what hard suffering kind of work even is in first place) and do their bit to tighten their belts (and go on diet for once) around their hefty waists as much they can (and help out those not so lucky to be so portly)?

Hey I guess let's see! But people should rid from their heads that any administration/leader (who is simply an ambassador of the govt/elitists) has some magic wand or magic curse....whatever you personally think of their personal attitude/demeanour etc.

It would fundamentally need that 1%, 5% and 10% (or whatever it is) of "apex" people getting their act together better than they have done so before. What some leader does is just little extra gravy on top to that....he can get some good ppl together or some corrupt ppl together...or whatever mix for whatever issue.....but really in developing countries, the systemic problem mostly lies outside the few politicians that are the "ambassadors"/"faces".

The few actual good leaders the world has seen in history are ones that created a system of quality institutions to always sustain and hold in someway....long after (sometimes centuries or even millenia) they have gone. It is catch 22 that we rarely could thank them to their face, because we needed that time to see what they made and how it took hold (deliberately or accidentally) in some great way. Truly great minds will always see this and pick humility over ego and let the great leveler of time and discourse decide upon them in the end...."if I saw further, it was because I stood on the shoulders of Giants"...said Newton.

So when it comes to leaders (and people in positions of power more generally) what they did/do as more imposing direct policy/action in their tenure is not really the most relevant thing (in most cases) at all people should even judge on so conclusively at drop of a hat. Yet we not only get stuck in judging that stuff by some way....we also predict and jump to conclusions on what hasn't even transpired yet. It is part of our psyche I suppose, we like to have a crystallised person we can praise or blame (and the excessive extremes apply depending how underdeveloped your mind is) for something and we want simple accessible things to praise/blame on....especially something we feel is totally above us and out of our control....and even better it deflects/absolves us of our own duty and responsibility on the issue at hand.

Too few actually practice what they preach themselves first.... i.e BE the change you want to see around you...set a good example for others. However much of that actually happens among a group of people (and thus they be the genuine guiding lights without claiming/boasting/imposing that they are), is simply the net result you will achieve in a country over something...."economy" is just one small part of it.

 

[Yaseen1]

In coming days fdi or investment will face decline as one of the big 4 firms Ernst and young is moving out of Pakistan and other audit firms are expected to follow this due to low audit fees as businesses here are facing decline in profit and cannot afford audit by top 4 firms .This will result in decline in investor confidence as most of investors trust on big4 firms audit and consider financials more credible if they are audited by big4 firms.
I think due to bad economic policies of govt we will experience drastic economic conditions.

 

[Abdussamad]

We'll probably default on our external debts within the next 5-10 years. This'll result in hyper inflation.

In the near term we will probably drop out of the IMF program next year because there's no way we are going to meet the revenue collection target they have set for us. FATF blacklisting is also possible this calendar year.

 

[Zhukov]

Depends on a lot of things. IMF reforms along with current direction of government will definitely stabilize the economy. Discourage Imports, Give Competitive advantage to Exporters, Reduce Deficits, Increase Tax Revenues Making the Government less dependent on State Bank Borrowing. Even the inflation you will see in coming months will be because of Taxes and not because of Oversupply of Rupee in market as it has always been in past.
But increasing productivity of industry and innovation is up to industrialists and People. Work like Koreans or Chinese if you want to be the next Korea or China

 

[maithil]

Lets wait and see if Supply side economic problems can be solved with IMF's demand management solutions. Coming days should be interesting to watch.

 

[RoadRunner401]

We'll probably default on our external debts within the next 5-10 years. This'll result in hyper inflation.

In the near term we will probably drop out of the IMF program next year because there's no way we are going to meet the revenue collection target they have set for us. FATF blacklisting is also possible this calendar year.

Caution, Caution above is a false flag Indian national!!!