IMF help a much-needed measure to overcome debt-default fears

Islamabad: Pakistan's decision to finally go to the International Monetary Fund (IMF) for a substantial loan programme is the essential next step in saving the country from an upcoming default on its debt payments.

The issue of keeping Pakistan solvent at a time when its foreign exchange reserves are depleting rapidly is central to the interests of the country's key players in its financial and stock markets.

It is far from clear if the Karachi stock exchange (KSE) will respond positively to news of a final agreement coming together with the IMF. However, the formal beginning of this process is undoubtedly the kind of development that must provide the assurance for Pakistan to continue its journey without a default on its debt payments.

For the stock market, the current times continue to bring about much turbulence. The KSE's fortunes have fallen badly. In just one of the many indications of how bad conditions have become, the KSE's management just in the past week auctioned a trading position on the stock market for Rs550 million (Dh25.15 million), which is almost a third of the price of a trading position just two years ago.

The trading position was offered for sale to meet the default of a stock broker who went bust in the wake of the latest crisis.

Once the IMF programme is brought together, the next big challenge for Pakistan will be that of providing a measure of security to players in the stock market, through a mix of reforms including some unprecedented ones.

The ongoing economic crisis in Pakistan has adequately demonstrated a fundamental weakness of the government. For too long, successive Pakistani governments have practically ignored that just about 1% of the country's population of 165 million pays income tax. It is absolutely vital to fill this gap.

- Farhan Bokhari is a senior Pakistan journalist who writes for leading international news publications