The International Monetary Fund (IMF) has rejected the Pakistan government’s claim that it has met all the conditions to avail of the fund to be released under an already agreed loan facility with the global financial body.
On Friday, it was reported that IMF will be discussing Pakistan’s budget plans for the coming financial year as part of a process to unlock the crucial financing injection for the cash-strapped nation.
The IMF review of Pakistan’s budget for the next fiscal was seen as a fresh hurdle for the crisis-hit country as the funds are crucial to resolving its acute balance of payments crisis. A staff-level agreement to release $1.1 billion from IMF has been delayed since November 2022 due to various reasons.
The IMF signed a deal to provide $6 billion to Pakistan in 2019 on the pretext that it would fulfil certain conditions. The plan was derailed several times and the full reimbursement is still pending due to insistence by the donor that Pakistan should complete all formalities.
Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar have repeatedly claimed that Pakistan met all the prior conditions agreed for reaching a staff-level agreement and there was no reason for holding back the funds or postponing it.
The Express Tribune newspaper in its report mentioned that the IMF has negated the claim made by the Pakistani government with respect to meeting all prior actions necessary to complete the 9th review.
The IMF continues to work with the Pakistani authorities to bring the 9th review to a conclusion once the necessary financing is in place and the agreement is finalised, the newspaper quoted Nathan Porter, the IMF Mission Chief to Pakistan, as saying.
Porter’s statement negated what the Pakistani authorities have been claiming since February 9, when the face-to-face talks ended inconclusively, the newspaper said.
Nathan did not explain the quantum of the necessary financing that Pakistan has to put in place to conclude the 9th review for the $1.2 billion loan tranche that has been delayed by seven months now.
Earlier, Dar had said that the country needed $6 billion to bridge the financing gap by June 2023. The country’s gross official foreign exchange reserves remain at $4.5 billion. The country needs to pay nearly $4 billion to the world on account of principal and interest on debt till June this year.
Since the government does not have a credible financing plan for the July-December period of the next fiscal year, Pakistan also needs to arrange funds to repay the loans during the first half of the next fiscal year.
The external debt repayments, including interest, for the July-December period amount to USD 11 billion, said the Finance Ministry sources.
Even if China and Saudi Arabia roll over their short-term debts, Pakistan will still need over USD 4 billion to repay the international creditors during the first half of the next fiscal year.
These include payments to the World Bank, the Asian Development Bank, Saudi Fund for Development, Islamic Development Bank and Chinese commercial banks.
The Ministry of Finance, already struggling to meet other conditions, seemed irritated by the IMF’s new demand. Senior finance ministry officials argued that the IMF should not link the approval of the 9th review with the next year’s budget.
They said that the issue of the fiscal year 2023-24 budget should be taken up at the time of the discussions for the 11th review.
The IMF’s demand is worrisome, said a Cabinet member on condition of anonymity.
Economist Sakib Sherani of Macroeconomic Insights said the IMF wants to ensure that the government remains committed to the agreed path of fiscal consolidation as the country prepares for elections later this year.
“Historically, the biggest fiscal slippages in Pakistan occur in an election year,” Sherani said.
Less than two months are left in the expiry of the stalled $6.5 billion IMF programme.
There seems to be no possibility that Pakistan and the IMF will conveniently complete the remaining three outstanding reviews of the programme, the report said.
(With agency inputs)
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