Default narrative

PRIME Minister Shehbaz Sharif on Monday came to the rescue of his finance team led by Ishaq Dar, amid continuing speculation that Pakistan was on the verge of a debt default. “Pakistan will not default,” he declared at a news conference as he explained that his administration was forced to accept tough IMF loan conditions because the multilateral lender no longer trusted Pakistan, thanks to the former PTI government’s failure to honour its commitments. But Mr Sharif’s reassurances may not be enough. There are reasons why speculation has persisted, even though Pakistan hasn’t missed or delayed a single debt payment since the financial crisis set in earlier this year. At the moment, a major concern is foreign exchange reserves dropping to a four-year low of $6.7bn as inflows dry up on account of Islamabad-IMF tensions. The disagreements between Pakistan and the Fund include, but are not limited to, the government’s flood-related expenditure estimates and serious fiscal slippages because of the failure to collect enough tax revenues to meet budgeted targets. On top of that, a certain narrative is being pushed by the PTI to pressure the coalition government to announce early elections. Before the news conference, PTI chief Imran Khan had already painted a dire picture of the economy while calling for snap elections to pull the nation out of the current crisis. Failure to do so would push us to default, he had warned.