ISLAMABAD: For successful completion of the 9th review under the International Monetary Fund’s Extended Fund Facility, US$3 billion fresh (as opposed to rollovers) external financing commitments from friendly countries are required.
This was stated by the former Finance Minister and noted economist Dr Hafeez Pasha. He added that the IMF wants a government that is focused on implementation of required reforms and is concerned at political uncertainty and economic situation in the country.
Pasha regretted that perception and credit rating of the country has plunged to the lowest ebb which may have increased IMF concerns on whether fresh financing would be provided by Saudi Arabia and the UAE which may explain why the Fund has been asking for commitments in writing from both countries.
UAE, Saudi Arabia: Dar says IMF seeking $3bn ‘guarantees’
Former finance minister said that once the staff level agreement is reached, inflows from multilaterals - Islamic Development Bank, Asian Infrastructure Development Bank as well as World Bank and Paris Conference on flood would start materializing to help bridge the financing gap.
Pasha contended that quantum of financing required for the current fiscal year would depend on the trade deficit. Although the trade deficit in February was only $74 million yet it was achieved by squeezing imports and if the same situation remains in the remaining four months of the current fiscal year, financing gap would be less.
Pasha however expressed serious concern that there are $1.8 billion worth of goods in containers, which is not good for the economy.
Former Finance Minister and Adviser to Chief Minister Punjab on Economic Affairs and Planning Dr Salman Shah concurred and stated that shortfall in gross financing needs to bridge the current account deficit and debt servicing may be $3 billion and the Fund requirement is a firm commitment from Saudi Arabia and UAE in this regard.
An anecdotal survey carried out by Business Recorder revealed that the general public has little trust in Ishaq Dar’s capacity to steer the economy towards sustainable growth and hold him responsible for not only the stalled IMF ninth review but also for the high inflation rate, particularly in food items, and the contracting economy that is increasing unemployment levels. Not sure whether the government would be able to implement the agreed conditions.
Copyright Business Recorder, 2023