THE forthcoming year, 2024, is likely to be characterised by a very high level of uncertaintyon both the political and economic fronts, with one impacting the other. Will the elections, if held, yield a clear majority for one political party, which will then equip it to exercise strong governance? The current financial year will proceed up to March 2024 under the umbrella of the International Monetary Fund (IMF) Stand-by Facility.

However, despite the presence of this facility, the inflow of external non-debt and debt-creating inflows has visibly diminished.

Consequently, the foreign exchange reserves have already fallen below $7 billion. The coming months include some lumpy payments and higher debt servicing. Therefore, by the end of the Stand-by Facility, reserves could once again be at a relatively low level. This risk has already been highlighted by the IMF.

Pakistan may have no option but to go for an Extended Fund Facility with the IMF, with difficult negotiations by the new government on the agenda of economic and financial policies. The annual external financing requirement will be up to $25bn, depending upon the extent of rollover of debt.

The time may probably come later in 2024 when, in the presence of some facilitation by the IMF, Pakistan opts to seek some reprofiling or even restructuring of external debt owed to bilaterals and private lenders. This will have to be combined with an extraordinarily tough reform agenda to build credibility with lenders.

The process of implementation of deep and wide-ranging reforms will inevitably imply the continuation of the high rate of inflation and low rate of economic growth. Poverty and unemployment levels will remain high.

The ultimate market test will be faced by the incumbent government of operating in a very difficult environment. We hope and pray that elections are held in time, and they yield a representative government which is willing to take tough decisions to bring stability and the process of growth back to the country. •