Tuesday, July 5, 2022

PM Khan meets IMF chief, what’s ahead? 


Muzammil Aslam
Muzzammil Aslam has over 15 years of experience in the fields of Economics, Equity Research, Business Development and Financial / Capital markets. Worked as Ex- Chief Executive Officer, EFG Hermes Pakistan Limited. Heading brokerage and inter-bank business and company affairs. He was engaged with KASB Securities Ltd. as Head of Business Development from 2004 to 2009 and with JS Global Capital Ltd. as Head of Business Development and Head of Research from 2009 to 2012. Thereafter, he has been managing his own economic research consultancy firm "Emerging Economics Research". Further, his work on economics has been actively pursued by key government institutions. By qualification, Mr. Aslam holds Bachelor of Commerce and Master of Public Administration Degrees from the University of Karachi, MAS Degree in Economics from Applied Economics Research Centre, University of Karachi and Master of Science Degree in Economics from the University of Bath, United Kingdom. Contact: [email protected]
The news came over weekend that Imran will meet Christine Lagarde at the sideline of Dubai Summit, and some corners of media went ahead and linked meeting with 14th IMF program conclusion. I resisted myself to comment on this development with haste, and was trying to figure out what has led this meeting to schedule. 
Apparently, no need for Prime Minister to meet Managing Director of IMF to request for program. But surely, there was big divide in the country when it comes to adopting new IMF program.
Opposition also taking an opportunity to reminding khan his views on IMF.
Imran khan in past _“linked IMF  program with his suicide”. _
Khan kitchen cabinet and Economic Advisory Counsel have so far failed to build consensus over new IMF program mainly on the backdrop of IMF debt trap and its ineffectiveness on Pakistan macros in the past.
With Asad Umar keep on insisting IMF to tone down its conditionality’s and presented homemade plan to IMF.
While IMF staff is pushing their own front loaded economic reform program.
The matter has lambasted by key rating agencies and forced them to temporarily down grade the long-term sovereign rating of the country.
Although PM khan is hopeful of revival of macros with or without IMF.
He surely wants to keep the track of first hand information rather than relying on information from his most trusted Finance Minister.
In that process, he has been meeting personnel who represented IMF in the past, Economist, opinion makers etc.
Some advised him to opt for IMF program without further delay and very few in minority advised him to pull things off through non-IMF means.
Given the divided opinions he gathered. His purpose to meet Lagarde to convince her with his seriousness towards revival of macro resilience through tough reforms.
But equally PM khan wants to spread out reforms over period without compromising the growth prospect. The above can be further revalidated from khan tweet post meeting:
_“In my meeting with IMF Managing Director Christine Lagarde there was a convergence of our views on the need to carry out deep structural reforms to put the country on the path of sustainable development in which the most vulnerable segments of society are protected”_
The press releases of both IMF & GoP are clearly pointing 14th program is bound to happen anytime from now.
Simultaneously, Prime Minister has delivered his key note speech at Summit and clearly mentions his intentions of tough painful reforms, meaning he broadly in agreement with IMF suggested reforms.
Encouragingly, the weekend events will bring far more clarity to set of investors who are looking for final verdict on whether Pakistan government will go for IMF or not?
Market from  now will start probing questions, regarding 1) the timing of IMF program, 2) Exchange & Interest rate outlook, and 3) structural reforms to stop fiscal bleeding.
In summary, the markets should receive this news positively.
As we are getting close to lock deal with IMF, certainly we may see pressure on exchange rate. State Bank may liberalise the exchange regime to semi manage float.
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