For almost a year now, Pakistan had been trying to implement tough economic measures required to revive the stalled $6 billion International Monetary Fund (IMF) bailout package. On Monday, Pakistan Prime Minister Imran Khan, with eyes on elections, announced a series of populist measures—that reversed most painful measures of the past—hinting a potential end to the IMF program, at least for the current government. 

Khan announced reducing petrol price by almost Rs 10 ($0.05)/liter and electricity by Rs 5 ($0.025) / per unit in what he claimed to bring relief to people who have been facing high inflation. These two measures among others have effectively undone the two most crucial measures recommended by the IMF to reduce the government’s circular debt. 

Pakistan will go into general elections in less than one and a half years from now, and Khan has been at the receiving end of people’s anger due to skyrocketing inflation, party fueled by global factors like high fuel and commodities prices. 

With the announcement of the recent measures, it seems all but certain that the government has shifted its focus to elections, instead of managing the country’s struggling economy. The government’s quest to receive a $1 billion tranche of the IMF bailout program failed last week as the IMF sought some additional reform and austerity measures. 

Other measures announced on Monday included tax exemptions for IT companies and freelancers. The country’s $2 billion IT sector is growing now and the government also said it would not face any issues on foreign exchange. 

The monthly stipend under the Ehsaas, the government’s flagship income support scheme for the poor, has also been increased from Rs 12000 to Rs14000. 

All these populist measures come at a time when the government is already under pressure, with a ballooning current account deficit—over $11 billion in the first seven months of the current fiscal year (July-June )—and skyrocketing inflation. Last month in January, the country recorded its highest-ever monthly current account deficit, $2.55 billion. 
 
The trade deficit in the first seven months of the current fiscal year remains around $27.35 billion, recording an almost 100 percent growth in comparison to the same period last fiscal year when it was around $14 billion.

(SAM)