Amid a stalemate on securing a bailout from the International Monetary Fund (IMF), Prime Minister Shehbaz Sharif has informed the fund’s Managing Director, Kristalina Georgieva, about Pakistan’s intention to secure a new bailout.
Seeking a New IMF Bailout: Pakistan’s Efforts to Revive the Economy
Minister of State for Finance and Revenue, Dr Aisha Ghaus Pasha, criticized IMF mission chief Nathan Porter’s comments on Pakistan’s political situation, stating that he should not interfere in domestic political matters.
According to sources, during a telephonic conversation with the IMF managing director over the weekend, the prime minister disclosed Pakistan’s intentions to sign a follow-up bailout package.
Pakistan’s current $6.5 billion program has faced setbacks, and the efforts to revive it over the past seven months have been unsuccessful. The program is set to expire on June 30.
Diplomatic corps and international financial institutions believe that Pakistan cannot avoid default without securing a new IMF package. In order to repay $25 billion in debt in the next fiscal year, Pakistan needs an IMF umbrella. The Ministry of Finance also acknowledges the need for a follow-up program to reinforce and build upon the reforms initiated during the current program, according to a senior official who spoke on the condition of anonymity.
However, the prime minister’s latest initiative to seek a new deal contradicts Finance Minister Ishaq Dar’s stance, who previously advocated that Pakistan should stop relying on the IMF. Nevertheless, some members of the economic team believe that the IMF program is necessary at this point in time.
The IMF managing director stressed that Pakistan should fulfill the outstanding conditions promptly, including arranging foreign loans and allowing the exchange rate to be determined by market forces by ending administrative controls.
Nathan Porter, the IMF’s mission chief to Pakistan, also reiterated these views in a statement, emphasizing that Pakistan should present the next fiscal year’s budget in line with the IMF framework and provide clarity on the exchange rate policy.
Government’s Response and Future Outlook
Minister of State for Finance, Dr Aisha Pasha, stated that the current program should be completed before discussing the way forward. She made this remark while responding to a question after attending a parliamentary committee meeting.
The prime minister contacted the IMF managing director to seek her intervention in reviving the program, particularly completing the pending 9th review before the program’s expiry by the end of June.
As the government’s constitutional term is also set to end on August 12, it remains to be seen whether the incumbent or interim government will engage in dialogue with the IMF for the new program.
Dr Pasha strongly criticized the IMF’s intervention in Pakistan’s domestic affairs, emphasizing that Nathan Porter should not interfere in the country’s political matters. She described Porter’s statement on political issues as “extraordinary” and reaffirmed the government’s commitment to democracy, urging all institutions to work within the parameters of the Constitution and the rule of law.
Dr Pasha mentioned that the government has not received any official communication from the IMF regarding its observations on Pakistan’s political matters. However, she emphasized that the IMF does not typically make statements regarding a country’s political affairs.
Regarding Finance Minister Ishaq Dar’s stance on initiating a telephonic call with the IMF head, Dr Pasha stated that the entire economic team was on board with the prime minister’s decision. She emphasized that the prime minister represents Pakistan’s interests and clearly stated the country’s commitment to completing the ongoing program.
Dr Pasha also confirmed that Pakistan has shared the budget numbers with the IMF, and discussions have taken place with the State Bank of Pakistan regarding issues related to the opening of letters of credit for imports.
The Ministry of Finance has proposed a budget outlay of around Rs14.6 trillion for the next fiscal year, with a federal budget deficit of approximately Rs7.8 trillion, suggesting a 52% increase over this year’s approved budget.
Dr Pasha stated that there is no possibility of further extension in the current program. She emphasized the government’s message to the IMF managing director that continuous delays in reviving the program are not in the interest of Pakistan or the IMF. The government has expressed its desire to complete the program, and the IMF chief has conveyed her expectation to see progress.
Pakistan is actively pursuing a new IMF bailout package after facing difficulties in securing the current program. The government recognizes the importance of an IMF package to repay debt and reinforce reforms. However, differing opinions within the economic team highlight the complexity of the decision. While the government seeks the IMF’s support, it also emphasizes the need for non-interference in domestic political matters. The completion of the ongoing program and a peaceful resolution in accordance with the Constitution and the rule of law are key priorities as Pakistan aims to address its economic challenges and move forward.