Apart from conducting free and fair elections in the country, the caretaker government would have to take some courageous economic decisions in its short tenure of around two months including approaching IMF to improve balance of payment situation.

The Caretaker Prime Minister Mir Hazar Khan Khoso, who assumed the charge on Monday, would face mountainous economic challenges in two months tenure. The interim government would face several economic challenges like continuous decline in foreign exchange reserves leading to depreciation of rupee against dollar, soaring budget deficit and most importantly the power situation, which is deteriorating with the advent of summer seasons.

The caretaker government would have to take some tough economic decisions like going into fresh IMF package to avert a crisis of balance of payments and to take steps to control the increasing budget deficit. Although the upcoming elected government would be responsible to handle issues related to the annual budget, pre-budget conditions seem hostile and will definitely have to be faced by the caretakers.The caretaker might approach to International Monetary Fund (IMF) to stabilise the country’s foreign exchange reserves; as the interim government would face unstable position of foreign exchange reserves, which stand to cover just three months worth of import bills.

The country’s foreign exchange reserves stood at $12.436 billion on March 15 2013 as against $16.550 billion of the corresponding period of previous year.The interim government would have to control the soaring budget deficit, as it might go beyond 8 per cent of the GDP during the ongoing financial year 2012-13 primarily due to: (i) shortfall in estimated FBR tax revenue by around Rs 300 to Rs 400 billion, ii) non-realisation of fee from the Auction of 3G licences amount to Rs.79 billion. iii) increase in domestic interest liability due to higher fiscal deficit by around Rs.100 billion; iv) increase in subsidy on electricity by Rs.108 billion due to non-increase in electricity tariff and v) increase in defence expenditure by Rs.30 billion due to increase in pays as a result of announcement by the Cabinet at the time of budget 2012-13 and vi) reduction of anticipated surplus from provinces by Rs.30 billion.

The energy crisis - which will deepen as seasonal demands starts increasing - would be another challenge for the interim government in its tenure.Another challenge faced by the interim government would be the depreciation of the rupee against the dollar. Pakistani rupee is under severe pressure against the US dollar due to heavy repayment to IMF and the government would further to repay $530 million to the IMF under its standby loan arrangement, which will put pressure on foreign exchange reserves and lead to the depreciation of rupee against dollar.