The bubble of the so-called macroeconomic stability has burst as the government has no other option left but to listen to the directions of the International Monetary Fund and immediately increase electricity and gas prices. The government has also assured the fund officials that it will scrutinise the foreign-funded projects to reduce the risks to fiscal and external accounts. The IMF has already expressed concern over the debt profile of the country which is going to reach nearly 70 percent of the gross domestic product but the government officials still expect positive outcome of the policy measures. Reportedly during the negotiations between Islamabad and the fund managers, the issues of structural reforms and loss-making public sector organizations were also discussed without reaching a conclusion at the end. The foreign financial institutions had times and again reminded the government that structural reforms are not necessary, but indispensible. However, the matter is still pending and the government is going to complete its tenure this year. The real worth of the foreign exchange reserves is lower than one billion dollars and this money is not enough for a few months import bill. In this situation, probably only one option has been left and that is to increase electricity and gas prices.
The government has assured the fund administration that it fully understands the vulnerabilities of the external sector, but has the capacity of debt servicing. However, the policymakers only relied on the depreciation of the rupee which had failed to restore foreign exchange reserves and minimize the trade deficit. When debt servicing is turning into a snowball, it will be strange to bank on the policy measures and expect to boost confidence of the foreign investors. There is a need to strengthen fiscal discipline by reducing debt-related vulnerabilities and control the current account deficit. However, the IMF has recommended the government to take additional measures and contain budget deficit to 5 percent of the gross domestic product. The mandate of the current government is going to end this year and the economy has been oscillated between hope and despair since 2013. The burden of debt on the nation was $45 billion four and half years ago, which has now increased to over $90 billion without any practical improvement in the industrial sector. An increase whatsoever in the utility bills will put additional burden not only on the common man, but also on the industrial sector. The government should think twice before implementing any decision during its closing days in the office.