Do more for Bailout Package: IMF told Pakistan

Pakistan is passing through difficult times, as the local economy is suffering due to inflation, circular debt, and adjournment in the approval of the IMF program. Though the government of Pakistan has fulfilled almost all terms and conditions associated with the loan program, the IMF is still expecting “Do More”.

After a deadlock between the finance ministry of Pakistan and the IMF on loan talks, there was a session of conversation between Prime Minister Mr. Shahbaz Sharif and IMF Mission Chief Nathan Porter. During the discussion, the IMF urged Pakistan to follow the footprints of its constitution to resolve the political disputes in the country to address the economic crunch.

In an unusual statement given by the IMF Mission Chief, it was said: “We are watching recent political developments in the country, although IMF and its representatives do not comment on domestic politics of any country, still we do hope that a peaceful way forward will be found in line with the Constitution and rule of law”.

This announcement came from IMF after the continuous crackdown against the Pakistan Tehreek e Insaf (PTI) leaders and workers, the abductions of people, the breach of the ninety-day constitutional limitation to hold the free and transparent elections in the two provinces of the country (Punjab and KP), and under the Army Act trial of civilians in military courts. This statement is considered rare and infrequent as the IMF does not comment on the political issues of any country.

According to sources, Prime Minister Shehbaz Sharif also contacted IMF Managing Director Ms. Kristalina Georgieva, sought her help in completing the 9th review for the IMF program, and requested her to play a role in breaking the deadlock. Sources claimed the PM also directed the Ministry of Finance to share the nitty-gritty of the federal budget with the IMF. Sources say that the demands of the IMF on the issue of external financing remain intact and the IMF wants to eliminate the difference between the interbank and open market USD to PKR exchange rate. Pakistan has fulfilled all the demands of the IMF, including external financing, but the staff-level agreement between Pakistan and the International Monetary Fund for $1.1 billion has not been finalized yet.

The contact between Ms. Kristalina Georgieva and PM Shahbaz Sharif was made one day before the criticism of Federal Finance Minister Ishaq Dar to the international lender (IMF). In a statement, Mr. Ishaq Dar said, “We are at a point where it would be extremely biased and disgraceful for them (IMF) if the 9th review doesn’t take place now”.

According to sources in the Ministry of Finance, the IMF will review the budget 2023-24 and discuss it with the officials of the Ministry of Finance. Proposals for important targets, including FBR goals and debt repayments, have been shared with the IMF, meanwhile, discussions between IMF and State Bank officials on financing for the next fiscal year are also underway.

In a statement, IMF Mission Chief Nathan Porter said that IMF is in contact with Pakistani officials for the board meeting, as the program expires at the end of June. The budget for the next fiscal year (2023-24), program targets, and adequate financing arrangements will be part of IMF meetings with local authorities.

International Monetary Fund (IMF) mission chief in Pakistan Nathan Porter said, “IMF takes note of political developments but does not comment on the country’s politics. Strong policies and financing are key to Pakistan’s macroeconomic stability and for this purpose, IMF staff is continuing to engage with Pakistani authorities. More broadly, overcoming the present economic and financial challenges would require sustained policy efforts and reforms for Pakistan to regain strong and inclusive private-led growth.”

While speaking to the media, Federal Finance Minister Ishaq Dar has expressed the hope that after the budget, the ninth review of the IMF program will be completed this month, however, the next government (after the fresh election in the country) will decide the future of the IMF program. He said “I have been dealing with the IMF for 25 years but I have never seen such a delay. I fear that all this is happening because of ‘geo-political issues’. Pakistan had arranged $ 4 billion financing, while the IMF ensured to arrange another two billion dollars of financing”.

Pakistan’s economy has been suffering from major problems for a couple of years but the last year especially has been quite disastrous for Pakistan on the economic front. The political situation that arose after former Prime Minister Imran Khan’s removal from the PM office (by a successful vote of no confidence) in April 2022 has exacerbated the current economic crisis. Pakistan has been demanding a bailout package from the International Monetary Fund to get its sagging economy back on track, but evidently, these efforts of the current PDM government, which have been going on for several months, are not proving fruitful.

Apparently, it seems that time and other fiscal indicators are not in favor of Pakistan, as the IMF program will end in the current month. Pakistan direly needs more loans to pay the previous loans from the IMF. Moreover, its crumbling economy requires more USD to adjust the balance of payments. Local authorities will continue their efforts to create a positive environment for the completion of the 9th review by the IMF.