The IMF Program Review And Role of the Private Sector

The IMF Program Review And Role of the Private Sector
Though Pakistan and IMF has preliminary got into an agreement to restore the halted program but this bailout package is insufficient for Pakistan to be back on track of the economic growth.

We are facing economic crises by already being in IMF program and due to flood damage. Pakistan is obliged to be in the program of IMF and to complete the program in order to avoid full blown default for its international obligation, which is a very grave situation to be in, like Sri Lanka. On account of flood relief, recently international community have hailed only $ 9.7 (b) and the pledged money is also conditional with IMF program agreement, till the time  we enable ourselves for bailing, flood support funds will not disbursed unless IMF agreement is finalised and executed.

Nevertheless, the government was struggling even before the floods, but after floods the situation is aggravated due to infrastructure destruction and of course wide swath of agriculture land in Pakistan, has been destroyed.

This brings us stricken by balance of payment crises and high level of debt servicing; Pakistan is left with very narrower options to bridge the gap of financing excepting winning the trust of the private sector in the development. Particularly at the time when we have a fragile structure and weak institutions poses greater risk threat to them like access to credit, taxes, and supplies.

In this backdrop the role of the private sector becomes much important to come up and play their role to enable government to avoid default. Can we move towards private sector led growth? China investment and export led growth comes from the private sector investment of small and medium enterprises and now they are covering the consumer markets of the world. East Asia states particularly after East Crises of 1997 onwards have mainly focused on the small and medium enterprises and now they are in emerging economies. Pakistan public sector cannot be a job provider anymore to at least 1.5 million jobs keeping in view the ratio of youth in this country.

The IMF program and conditions will further restrict for the public sector expansion, and would push to develop private sector to provide services and generate revenue. The private sector has a unique position of creation of job opportunities and revenue, distribution of goods and services more efficiently than the public services and goods. The IMF in its current talks also emphasised on the privatisation of the non-performing public entities that includes the national airline, the power distribution and transmission companies etc, no doubt the circular debt takes away a greater chunk of the revenue for the years now, and also airline losses are also burden on the tax payer and national exchequer.

The only panacea at the point of time in Pakistan can come forward for help is the private sector, roughly 75% of the labour in Pakistan is employed in private sector and the rest are in public services, which means this ratio is going to be reduced further by the tumbling economy which mirrors more economic crises.  Pakistan is left with very narrower options to bridge the gap of financing excepting winning the trust of the private sector role in the development even the smaller and the informal sector. Particularly at the time when we have a fragile structure, the private sector woks in a very tense situation.

The big companies just by going beyond the corporate social responsibility, can become catalyst to largely impact the society which is normally provided by the State, why can’t be utility store kind of system be operated consortium of private companies, where the state can be relieved from subsidization burden.

Particularly they are the one taking more benefit of the situation when the economic situation is fragile. The private sector can play in stabilizing the food inflation by engaging with the government in service delivery under private public partnership.

Macroeconomic stability is highly link with the credit flow. One of leading indicator of financial sector contribution is the role of the  credit institutions in the growth of credit expansion, can play role by giving long term and with minimal interest so that people can build their business and help others in providing jobs in private sector.

To mitigate economic crises , there is a need of an informed dialogue between the business community and policy makers. Private sector may be encourage to have share in planned investment, government must be in the partnership  with private sector in larger public investment, and also the weak public entities can be handed over to the private sector. The private sector has its capital invested abroad, kept in the banks , it will be utilized in the productive manners and the capital inflow will increase once government is able to win the trust of the private sector, it will reduce the pressure on public exchequer and  increase in developmental budget.