There’s a context to ‘unusual’ IMF talks

This is apropos a Business Recorder news item titled “IMF team holds ‘unusual’ talks over USD7 billion bailout” carried by the newspaper yesterday.

Quoting sources in the finance ministry, the news report has said, among other things, that “the unscheduled visit of the IMF mission and talks beginning with meeting the country’s finance team are too early for first review of the IMF’s Extended Fund Facility (EFF), which is due in the first quarter of 2025.”

According to the report, the main agenda of the visit is to take a stock of the country’s fiscal deficit, which includes a nearly 190 billion rupees (USD685 million) shortfall in the revenue collection in first quarter of the current fiscal year. The external financing gap of USD2.5 billion which Pakistan needs for the current fiscal year will also be discussed by the mission.

In my view, however, there is a proper context to the early arrival of the IMF mission in Pakistan to hold “unusual talks” with the finance minister, governor of State Bank and Pakistan (SBP), and the chairman of Federal Board of Revenue (FBR).

The team’s presence in the country strongly reflects both prudence and caution on the part of the Fund. The visit also displays Fund’s lending approach to the country under the current political dispensation. The situation indicates a lack of trust.

From the lender’s perspective perhaps the ruling government of Pakistan Muslim League-Nawaz (PML-N) is likely to renege on several pledges that the latter had made prior to the approval of the bailout by the IMF’s executive board.

The recent action of Punjab government led by Nawaz Sharif’s daughter Maryam Nawaz with regard to power subsidy in the province and its plan or intention to purchase a beleaguered Pakistan International Airlines and certain statements of party supremo Nawaz Sharif with regard to country’s economy have given birth to some legitimate suspicions about the government’s approach to the conditionalities that the lender had set for the country prior to agreeing to a bailout.

Rubina Tahir Masood Khan (Islamabad)

Copyright Business Recorder, 2024