Crucial $1.1 billion IMF deal eludes Pakistan for now, talks proceed

Tough instances are forward for Pakistan, as Islamabad and the International Monetary Fund (IMF) have failed to achieve an settlement on a much-needed $1.1 billion bailout bundle aimed toward stopping the nation from going bankrupt.

Karachi,UPDATED: Feb 11, 2023 22:36 IST

Men attain out to purchase subsidised flour sacks from a truck in Karachi, Pakistan (Photo: Reuters)

By Reuters:

Pakistan and the International Monetary Fund are to renew talks on-line subsequent week, they mentioned on Friday, after ten days of face-to-face discussions in Islamabad on tips on how to preserve the nation afloat ended with no deal.

With the nuclear-armed nation within the grip of a full-blown financial disaster, the IMF talks are aimed toward unlocking a minimum of $1.1 billion of stalled funding as a part of a $6.5 billion bailout signed in 2019.

Finance Minister Ishaq Dar advised reporters Pakistan had agreed with the IMF on the circumstances to launch the funds, which have been delayed since final December.

Talks would resume just about on Monday, he added, citing “routine procedures” for the delay. “We will implement whatever has been agreed upon between our teams,” Dar mentioned.

In an announcement, Pakistan IMF Mission Chief Nathan Porter confirmed talks have been persevering with and that appreciable progress had already been made. The hold-up, although, despatched the worth of the nation’s authorities bonds tumbling once more.

Pakistan is in dire want of a profitable consequence. The $350-billion economic system remains to be reeling from devastating floods final yr, and the federal government estimates rebuilding efforts will value $16 billion.

The heavily-indebted nation solely has sufficient international reserves to cowl lower than three weeks of essential imports. The longer it takes for the IMF tranche to be paid out, the upper the danger of default, analysts say, particularly with elections additionally looming.

Last week, Prime Minister Shahbaz Sharif known as Pakistan’s financial scenario “unimaginable.”

“Ideally, Pakistan should have reached a staff level agreement at the end of the IMF mission,” Khaqan Najeeb, a former finance ministry adviser, advised Reuters.

“Delay is untenable.”

Read | ‘IMF bailout circumstances past creativeness however…’: Pak PM as financial disaster deepens

IMF MEASURES

The so-called staff-level settlement, which then must be accredited by the IMF’s head workplace in Washington, have to be reached earlier than the funds are disbursed.

In addition to the stalled tranche, one other $1.4 billion stays of the $6.5 billion bailout programme, which is because of finish in June.

Experts mentioned Pakistan wants the payout as quickly as potential. “If this drags on for, say, longer than a month, things get more difficult as our forex reserves have reached a critical level,” former central financial institution Deputy Governor Murtaza Syed advised Reuters.

The circumstances set by the IMF embody a return to a market-based change price and better gas costs, measures that Pakistan just lately carried out and which have already despatched inflation to a document excessive – 27.5% yr on yr in January – and created shortages in some imported items.

Dar mentioned Pakistan had additionally agreed with the IMF to introduce fiscal measures, together with new taxes.

Analysts worry extra fiscal tightening may tip the economic system additional into disaster.

“The government has not only wasted over five months in realising the gravity of the situation, it is still sleepwalking the country into an economic abyss,” mentioned Sakib Sherani, who served because the finance ministry’s principal financial adviser in 2009-10.

READ | Pakistan to impose Rs 170 billion in taxes after IMF deal: Report

Published On:

Feb 11, 2023