Should we go to the IMF?

Resolving the immediate external balance of payments crisis and some fiscal stabilization

Some thoughts.

  1. Resist going to the IMF in the first 100 d – They are expecting us. We do not have a plan for them. We can end up with a ‘bad deal’ and they could easily squeeze us and set us up for failure. IMF does not do growth economics! So, do the following first, get a plan with the right numbers together.
  2. Organize a global and regional and local, public and private, pledging conference for naya Pakistan – Our leader’s image is at an all time high. Cash it in. In October 2018, prepare for and organize a pledging conference in the convention center in Islamabad. Two parts. First for countries where ‘friends of Pakistan/Imran’ come and support a prepared revival plan promising improved governance and lesser leakages. Second, where we launch the ‘naya Pakistan’ bond and present various options for how private Pakistanis and other sympathetic capitalists can assist/invest in us. Keep the bond buy-in low [suggest USD 1,000] enabling the labor and working class Pakistani working abroad to participate. Estimated yield – USD 5 to 10 bil.
  3. Open up talks in parallel to restructure the existing debt and projects with all IFIs and bilaterals – Review and restructure the existing debt stock—cash in sympathies and support. This can be done separately for CPEC related debt stock and for the other [non-CPEC] debt stock. Second, the current portfolio of IFI/bilateral financed projects is full of fat and can be restructured along the lines we did in 2005 and 2010. The ‘human emergency’ facing Pakistan can be highlighted and shown clearly that if this is not done poverty levels [which Pakistan has worked hard over the last quarter century to bring down] will rise and the demographic dividend will become a demographic timebomb [youth with no education and jobs]. Both these can yield/create a space of USD 3 – 5 bil.
  4. Take stock of the CPEC debt and its looming repatriations [earnings and profits] separately and talk China – This will also be the discussion wherein the CPEC portfolio can be reset, sunk-cost-analysis carried out, AIIB/China Bank/Chinese Government direct assistance sought. Yield is expected to be up to 3 bil USD. Doing this will also send the signal to the IMF/US Treasury that they are not going to be called upon to pay for liabilities created by China!
  5. Now take on the IMF after starting and progressing on all the above measures and create a plan which enables you to take on SOEs and labor rationalization programs along with right-sizing the government/government expenditures – With the wind in your sails—having demonstrated that you did not come running to the IMF, and with a real plan in your back-pocket and demonstrated actions [the above 3], call in the IMF on your terms and request for discussions. By now they and you both will have reassessed ‘numbers’ on the fiscal front and taken in the real political economy impact of ‘naya Pakistan’. Use IMF to a) right size government and government expenditure, and b) to tackle the burden of the SOEs and related labor rightsizing issues—the Wealth Fund comes in here. Yield estimated at USD 6 – 10 bil.