Print Print 2023-06-09

Stalled bailout: IMF says govt has to satisfy it on 3 counts, starting with budget

  • These include restoring proper functioning of the FX market, passing a FY24 Budget consistent with programme objectives, and securing firm and credible financing commitments
Published June 9, 2023

KARACHI: Pakistan has to satisfy the IMF on three counts, starting with a budget due on Friday, before its board reviews whether to release at least some of the $2.5 billion still pending under a lending programme expiring this month, an IMF official said.

Esther Perez Ruiz, the International Monetary Fund’s resident representative for Pakistan, said on Thursday there was only time for one last IMF board review before the end of the $6.5 billion Extended Fund Facility (EFF) at the end of June.

Pakistan has barely enough currency reserves to cover one month’s imports. It had hoped to have $1.1 billion of the funds released in November - but the IMF has insisted on a number of conditions being met before it makes any more disbursements.

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“As communicated to the authorities, there can be one remaining Board meeting under the current EFF at end-June,” Perez Ruiz said in an email response to Reuters.

“To pave the way for a final review under the current EFF, it is essential to restore the proper functioning of the FX market, pass a FY24 Budget consistent with programme objectives, and secure firm and credible financing commitments to close the $6 billion gap ahead of the Board,” she added.

With just over three weeks to go before the EFF expires, there is a lot the government has to do.

The IMF had tasked Pakistan with securing external financing commitments for $6 billion from other sources, but so far it has only obtained commitments for $4 billion, mostly from Saudi Arabia and the United Arab Emirates.

Under pressure to shift to a more market-determined exchange rate regime and shut down an unofficial currency market, Pakistan removed daily limits on fluctuations earlier this year, but analysts suspect the authorities are still trying to manage the exchange rate, fearing the rupee could fall too far.

Perez Ruiz laid out the IMF’s broad expectations for the upcoming budget.

“The focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space to increase social spending,” she said.

More such spending would defray the impact of inflationary pressures on Pakistan’s most vulnerable people, Perez Ruiz added, but the government needed make more progress to identify spending and revenue-generating measures to achieve this.

Analysts have said Pakistan may need to enter into a new IMF programme after the completion of the current EFF bailout.

But Finance Minister Ishaq Dar told a press conference the current government would not talk to the IMF about any new programme ahead of elections due to take place by November, saying to do so would be “undemocratic and unfair”.

“It will be the prerogative of the new government to negotiate a new programme with the IMF,” Dar said after presenting the country’s economic survey.

The country is reeling from an economic crisis with inflation running at a record 37.97% in May. The government has imposed taxes, raised energy tariffs and scaled back subsidies in an attempt to persuade the IMF to unlock funding, and its central bank has also raised policy interest rates to a record 21%.

The IMF has conducted just eight of the 11 reviews that were to take place during the EFF. The last one took place in August last year.


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Ashfaq Jun 09, 2023 09:01am
We dipped under $4 billion and with it without imf, things will get even tougher. If pdm sticks around till august it will be a major disaster for economy
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A2aliii Jun 09, 2023 09:42am
Dar & establishment remains most Incompetent persons of Pakistan & history. Both of them show surrender themselves. Hanging both of them will set out path of Democracy & prosperity for people of Pakistan.
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Tulukan Mairandi Jun 09, 2023 10:22am
None of these preconditions wjll be achieved. Pakistan will default. Pakistan will fall into famine. Pakistan willl balkanize. Ishaq Dar, Shebaz and gang will fly back to London. Establishment will continue their plunder.
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Mr. % Jun 09, 2023 10:54am
@Tulukan Mairandi, I hope this happens, honestly. We need to default in order for a system reset else these plunderers and ra*ists of the land will continue to milk us - at least this way they will fly back to London and hopefully be put into their graves there
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Truthisbitter813 Jun 09, 2023 01:01pm
IMF is just playing the West's stooge now. No need for Pakistan to even entertain the fund's chicago boys policies that have failed in the developing world ever since IMF was established.
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