Love/Hate Relationship with the IMF
Finance Ministers come and go, but one thing that remains constant is Pakistan's relationship with the IMF.
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Ishaq Dar's return is signaling aggressive efforts to fabricate an artificial exchange rate (in the short-term), even at a time when the U.S. Federal Reserve is hiking interest rates, thereby pulling down an array of global currencies. However, PKR has miraculously started to make small gains after almost six weeks.
With a few months that Ishaq Dar has before the scheduled elections in 2023, there is a high probability of an inevitable reversal of the fiscal restructuring conditions set by the IMF for these months, including overturning taxation policies and rejecting a market-determined exchange rate, throwing all available financial resources at the next elections.
This in turn means that the next government will make efforts to initiate a 24th IMF program in 2024 – regardless of who wins the election in 2023.
As Shamshad Ahmed, Pakistan’s former foreign secretary and representative to the United Nations said:
'Anyone who takes charge of the government immediately comes to us and asks us to arrange a trip to the U.S. or Saudi Arabia to go looking for loans right away.'
GRAPHIC OF THE DAY
Ishaq Dar prefers a stable currency, but, a return to PKR stability might threaten Pakistan’s ability to keep its IMF program on track
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What Else We’re Reading
New Finance Minister of Pakistan vows to tame inflation and cut interest rates (Reuters)
Stocks stage a 531-point rally on Dar's return (Dawn)
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