Will Pakistan Default? Maybe Yes, Maybe Not – OpEd

Lately, the question is getting louder, Will Pakistan default? The critics are distinctly divided into two groups, one saying may be and other saying may be not. Both the groups have their own premises and none can be termed right or wrong.

I am of the opinion that Pakistan has never defaulted in the past and it will never be allowed to default. As in the past, the country will be bailed out, on the eleventh hour. The IMF and all other multilateral institutions can’t afford an atomic power to commit default.

I am of the opinion that at present Pakistan does not appear to be a circumstantial defaulter but indecisiveness of the incumbent coalition government, headed by Shehbaz Sharif is making it difficult for the lender of last resort, International Monetary Fund (IMF) to conclude the deal.

Without mincing my words I will say’, “Shehbaz Sharif does not understand gravity of the situation, he acting stubborn and many of his decisions can be termed self destructive”. My premise is based on his consistent refusal to increase electricity and gas tariffs and petroleum price.

I have spoken to some business leaders and even the common man on street says, “Pakistan has no option but to arrive at consensus with the IMF and get the next tranche released”. Saudi Arabia is willing to give US$3 billion, subject to release of the tranche by the IMF. Ironically, Shehbaz and his economic advisory team have failed in understanding this clue.

I tend to support the group which says, “Pakistan has the capacity to avert an eminent default”. The current balance of payment crisis is because of huge imports and paltry exports. The gap is being bridged by US$2.5 billion remittances received every month. Many of the critics fail to understand this blessing. Please recall “IMF has promised to give US$2 billion over the next two years, but overseas Pakistanis are sending US$2.5 billion per month”.

The next step is to curtail import by banning or imposing quantitative restrictions. The incumbent government has decided to curtail import which is praise worthy decision. However, it is committing a horrendous by opting for load shedding of electricity to curtail oil import bill. Outages in the industrial areas are affecting output, raising cost of doing business and eroding competitiveness of the Pakistani exporters.

One of the factors responsible for higher import of food items is rampant smuggling of these products to the neighboring countries. This smuggling can be stopped simply by allowing export of these items to Afghanistan, India and Iran. Both Afghanistan and Iran, also suffering from acute shortage of foreign exchange, are keen in entering into barter trade and/or trade in Pakistani currency.

Please allow me to say that if Shehbaz continue to live under the shadow of Nawaz Sharif and Ishaq Dar, he will sink deeper into the mess. He must listen to his coalition partners and make some difficult decisions. However, he has to get rid of his idiosyncrasies and behave like a real statesman.