IMF stresses on ‘staying within agreed policy framework, securing financing’

  • Washington-based lender says it has taken note of recent (political) developments, and hopes peaceful way forward is found
Published May 14, 2023

The International Monetary Fund (IMF) said on Sunday it hopes a peaceful way forward is found, a remark that comes as Pakistan wrestles with a simmering political crisis at a time of severe economic distress.

The IMF also stressed that staying within the policy framework agreed for the review and sufficient financing from partners remain key to regaining macroeconomic stability, amid reports that the government’s action plan would wither in the face of rising political noise.

“We take note of recent developments, and while we do not comment on domestic politics, we do hope that a peaceful way forward is found,” IMF’s Resident Representative for Pakistan Esther Perez Ruiz told Business Recorder via message early Sunday morning.

Pakistan’s bailout programme with the IMF has been stalled at the ninth review since November, while talks on the staff-level agreement have dragged on over securing necessary financing assurances to bridge the balance of payments’ gap.

Pakistan earlier said it has managed to secure $3 billion in commitments – Saudi Arabia’s $2 billion and another billion from the UAE – but reports suggested the amount was around half of what the lender wanted in assurance. The amounts are yet to be deposited with Pakistan’s central bank.

“Staying within the policy framework agreed for the review and sufficient financing from partners to support the authorities’ implementation efforts remain key to regain macroeconomic stability,” Ruiz said.

Analysts say measures that needed to be taken on the domestic front have already been implemented, including additional taxation measures, hike in energy tariffs, and free-floating exchange rate.

Ruiz stressed that these steps were important to stabilise the economy.

“The February mini-budget, the adjustment of energy prices, and the measures aimed at easing import restrictions and a market-determined exchange rate, are important steps to stabilise the economy while supporting the most vulnerable.”

She added that funding commitments announced so far are “welcome”, but there is still a gap.

“The IMF welcomes the announcement of important financial support to Pakistan from key external partners and looks forward to obtaining the remaining necessary financing assurances.”

Pakistan has also told the IMF it will not implement a fuel subsidy programme as the two sides continue to negotiate resumption of the bailout.

Earlier in May, the IMF reiterated that it is working with Pakistan to bring the pending ninth review to conclusion “once the necessary financing is in place and the agreement is finalised”.

Securing commitments from financing partners has become a major challenge for the government that is also faced with a massive crisis on the domestic front.

Pakistan saw a fresh wave of violence earlier this week in the aftermath of Imran Khan’s arrest on Tuesday with protesters ransacking state and private property, prompting the government to deploy army troops in two provinces as well as the federal capital. At least nine people died in the unrest, police and hospitals have said, while hundreds of police officers were injured.

The government made several arrests, which targeted top leadership of Khan’s party – the Pakistan Tehreek-e-Insaf (PTI) – as well as his supporters with reports suggesting more than 4,000 people have been detained.

Khan, freed on bail on Friday, condemned the violence that ensued, but called for protests as he pushed ahead on his call for elections. Talks on holding polls failed earlier.

At the same time, the country’s economy has continued to bear the burden of mounting debt and falling foreign exchange reserves. Talks of default gathered steam again this week before Finance Minister Ishaq Dar moved to pacify markets.

Bilal Memon

Bilal Memon is the Head of Digital Content at Business Recorder. His Twitter handle is @bilalahmadmemon

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Notsurprised May 14, 2023 02:29pm
The IMF is complicit in the unrest. It is precipitating uncertainty, inflation and PKR deval by moving goalposts and turning this review into the most detailed drawn out in history of IMF itself. But for Ukraine all coffers open. What do you want, that Pakistan turn into a warzone due to economic distress? I doubted it before but now IMF mala fide is clear as a result of its ever increasing demands. (Who gets USD 8 bln lined up to get 1 bln aid?).
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Jani Walker May 14, 2023 03:46pm
Default looms. This guy Dar is deliberately not implementing IMF requirements thinking that it will save PML-N vote bank. Maybe so, but a default will wipe out most political parties and the ruling classes.
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TimeToMovveOn May 14, 2023 04:25pm
@Notsurprised, There is a difference between Ukraine and Pakistan. The IMF also opened up its coffers for Bangladesh within a week no questions asked. Why? Pakistan is a constant begger, that it is gone to the IMF 23 times. It has also begged and borrowed money from every country it can. Bangladesh and Ukraine have not been like that. Remember when you are asking money from IMF, you are asking money from people like me, Americans who have given our Govt/tax money to the IMF. You hate us so much, should we be obliged to give. Also, if you were a banker, would you lend money to your own corrupt incompetent govt?
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TimeToMovveOn May 14, 2023 04:27pm
@Jani Walker, Dar played the IMF-like politics. I does not want to do the reforms the IMF wanted, but kept the IMF hopeful and played Pakistan like a victim. He had not intention of going through the IMF program. He was not sincere. if he removes import restrictions like IMF wanted, the PKR will be 350 and he will lose support.
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Haq May 14, 2023 04:34pm
Kick IMF out...
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Muhammad Iftikhar May 14, 2023 05:28pm
Meet your needs with your own resourses. Political govt wants achieving higher growth rate in short time that is only possible through Imports that put burden on us and after taking IMF programme one time we stuck in deeper quagmire other time and go lender's door again and again. To come out of this quagmire I have the following suggestions... i. We import Energy(oil, gas, LNG, coal etc) of about $20 bn. Get these from Iran and Afg through Legal as well as illegal ways. It saves $17 bn. ii. Open up the closed border with India to eradicate food inflation. It saves $3bn. iii. Cancel all FTA's due to which we lose billions of dollars every year. iv. Control dollar smuggling to Afg. v. Gentrate Current Account Surpluses and after implementing these points, trade surpluses would be genrated. v. Increase exports by giving competitive energy rates to export sector. vi. Eradicate interest and reshape banking sector to Islamic model of profit and loss sharing.
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Tulukan Mairandi May 14, 2023 05:29pm
Say what you want. IMF deal is dead. Period. Get prepared for a Default
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Muhammad Iftikhar May 14, 2023 05:31pm
vii. Property is unproductive and is profitable in every business here in Pak. People buy plot of 50 lakhs(generally in Pkr),after 10 years they sold it for 20 crores(in Pkr). They buy luxuary things from their profit like Cars (in $) and other imported things which hamper forex reserves. This sector should be taxed at the rate of 30%. In comparison businessmen start business with 50 lakhs, They pay taxes, higher energy cost and take risk of loss cannot make 20 crores from this investment. He expand his business from profit money. viii. Increase exports by completing SEZ and provide cheap energy to them.
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Love Your Country May 14, 2023 06:51pm
IMF makes a statement every other week and is playing an unprofessional game with Pak.
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Love Your Country May 14, 2023 06:53pm
As a nation, we need to find a long term solution for this problem. But IK is willing to risk everything to come back to power through unlawful means.
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KU May 14, 2023 07:07pm
A peaceful political way out in the future is not on the card of the present government and Co., everyone will witness surprising legislations and plans that will ensure a continued status quo as well as the rule of the minority vote government. They all know the power of propaganda and how emotional exploits work to keep people guessing and hoping for better days. What surprises everyone is that no international watchdog or country opined when NAB laws and Supreme Court rules were being amended to stop prosecutions against the sitting government ministers and civil servants. In recent years, western media severely criticized the Italian government when their laws were amended to favor their parliament ministers. Guess even the international watchdogs consider countries more equal than others.
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WarrenDesiBuffet May 14, 2023 07:08pm
@TimeToMovveOn, umm then don't give and get on with the decline and default of the US itself. The end of the petrodollar means the US will be as bad as Pakistan soon enough. But why IMF keeps us hanging if the almighty americans do not want to give us their alms now that they have exited Afghanistan? We are well aware that expat pakis like you wish for Pakistan to default because ladla niazi is not on the throne. But those of us who live here would rather see stability through any means. Corruption is in Bangladesh too, as well as the US. This is just geopolitics and pressure to move away from China.
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TimeToMovveOn May 14, 2023 07:46pm
@Haq, What is your answer if kicking IMF out means, default on loans. In fact, it is your friends like China, KSA, and UAE that have said that they will lend money only if Pak remains with the IMF. Why dont you ask your friends to remove that condition. And then you can kick IMF out. Have you not heard that beggers cannot be kickers.
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Ash Chak May 14, 2023 07:47pm
The IMF hasn't increased the external financing requirements to $ 8 Billion. It's still $6 Billion. However they want to see the money in the bank before they open their purse strings. In other words they do not trust Dar. Do you blame them for not doing so?
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azfar Ali May 15, 2023 12:01pm
IMF should maintain its non-partisan global financial partner role and should not unduly indulge in lingering financial support . New Global political scenario will take its shape despite such practices.
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TimeToMovveOn May 15, 2023 08:33pm
@WarrenDesiBuffet, "This is just geopolitics and pressure to move away from China." We, as Americans, don't want to send our money to friends of China. Plain and simple. You guys take our money at low interest, to pay of your China high interest loans. Are we stupid to help you with this hawala. Over the years, my fellow Americans and I have DONATED billions of dollars to Pakistan--donations--not loans like China. Only to be backstabbed by Pakistan. We have had enough. China has 3 trillion in reserves. Go ask them for the measly 1 billion dollars you seek from the USA. BTW, why has your best friend china, not even waived $1 in loans.
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Tahir Alvi May 19, 2023 12:22pm
IMF serves as a monetary agency but on occasion, it follows directives that are issued by its principal funder such as the USA. Pakistan must focus on improving the structure of its economy as well as implementing effective measures to collect taxes from those who evade or fail to pay adequate amounts. Preventing the flow of smuggled items from Afghan and Iranian borders via UAE should be a priority while developing policies that promote both export growth and skillful education, emphasizing the importance of a just society. People hear these things daily no matter the source
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