IMF pact won’t decrease default risk: Miftah
A former minister of finance has stated that the current government will not be effective unless and until there are structural changes.
According to Miftah Ismail, a former finance minister, even if an agreement is struck with the International Monetary Fund (IMF), there is still a chance of Pakistan defaulting.
Miftah claimed in an interview with a private news channel on Thursday that the IMF accord will not immediately reduce the danger of default or the proportion of that risk.
Nonetheless, he thought that since “essential procedures” had been completed, the deal will be inked by next week.
The former minister said that because the international lender had previously communicated with the prime minister directly, certain political actions must be performed, even at the level of the prime minister. Talks with “friendly nations” must also be held, he continued.
According to Miftah, there is a “confidence deficit” between the finance ministry and the IMF that could be resolved by the prime minister engaging in diplomatic relations with other countries.
The “first step,” he insisted, was the IMF deal.
Although the State Bank of Pakistan (SBP) was tightening monetary policy by rising interest rates to control inflation and, at the same time, infusing cash into the market through Open Market Operations, the interviewer then questioned whether anything in the economy was doing well (OMOs).
The government’s desire, according to Miftah, is insatiable. He also noted that because banks received loans from the government before repaying them, there was no monetary tightening.
He continued by saying that there must be some structural adjustments, such higher taxes and lower spending.
Miftah claims that the government’s structural choices prevented it from being possible to control the deficit. He argued that the country’s budget deficit, which represented 25% of Pakistan’s GDP, could not be covered even if Rs 20,000 billion were collected.
He claimed that in the previous 70 to 75 years, the government was unable to carry out any work, making it clear that he was not referring to the current administration or the Pakistan Muslim League-Nawaz (PML-N), but rather all governments. He explained that only half of the country’s children attended school.
He continued by saying that despite all governments’ assurances, circular debt has been rising for the past 20 years.
Miftah noted that the government had attempted to privatise the bank for small and medium-sized businesses for the previous 15 years but had been unsuccessful. In contrast, he cited China’s massive gas pipeline network and Dubai’s construction of “half a city” in just 15 years.
“Unless and until we reform, and I believe this entails empowering local governments, we are nowhere,” the speaker said.
