Volatile political situation in Pakistan delaying IMF deal report
Islamabad, March 15 (PTI) Pakistan’s current volatile political situation has become a factor in delaying the much-needed agreement with the Washington-based IMF that could stabilize the cash-strapped country’s economy, a media report said on Wednesday.
Pakistan’s economy is in a bad state. The country is awaiting a much-needed US$1.1 billion fund from the International Monetary Fund (IMF).
The fund is part of a US$6.5 billion bailout package approved by the IMF in 2019, which analysts say is critical for Pakistan to avoid defaulting on foreign debt obligations.
Citing diplomatic sources, the Dawn newspaper said global lenders, particularly the IMF, are seeking assurances from Pakistan that the country’s future political body will honor any deal they sign with Islamabad.
Pakistan and the International Monetary Fund have been in talks for months to restart an established US$7 billion IMF program, but have yet to reach an agreement.
Last week, Finance Secretary Hamad Yaqoob Shaikh told reporters that even though Pakistan had missed such a deadline in the past few days, a deal was likely in the next few days.
Pakistan has already implemented policy measures, including IMF-recommended taxes, higher energy prices and raising interest rates to a 25-year low.
But two key issues remain unresolved: financial and political guarantees. The IMF wants Pakistan to show that it can raise sufficient financial resources to close its balance of payments gap.
Since the IMF provides only part of the loan a borrower needs, it must show that there are commitments from other lenders to bridge the gap.
According to diplomatic sources, China, Saudi Arabia and other partners have offered aid, but the IMF thinks it is not enough. The Pakistani government says the gap is $5 billion, but the IMF believes Pakistan needs $7 billion.
The IMF also needs assurances that the government in Islamabad that signs the deal can implement it.
But the expected elections in Khyber Pakhtunkhwa and Punjab province and the possibility of national elections soon have prompted speculation that the current government may or may not be there to implement the IMF-signed deal.
Elections are scheduled for April 30 in Punjab province, while the governor has proposed holding elections in Khyber-Pakhtunkhwa province on May 28.
“That is why the IMF needs assurances from the opposition forces, especially the Pakistan Tehreek-e-Insaf (PTI), that they will honor the deal if the current government is replaced,” a source told the newspaper.
“Though the future government is more likely to fulfill the promises made by the current government, the opposition does not want to make things easy for the government by giving a promise at this stage,” the source added.
“In such a situation, the IMF usually reaches out to the opposition, and may even contact Imran Khan.”
“Until these two things – financial and political guarantees – are approved, the IMF cannot send the documents to the board to conclude the agreement,” the statement added.
“Yes, it is true that the IMF and Pakistan are close to finalizing the agreement, but it is difficult to say when they will sign it,” the source added.
Separately, US Ambassador to Pakistan Donald Blom wanted an agreement between Pakistan and the IMF that confirmed Washington’s willingness to support Washington in its efforts to restart the stalled bailout program.
Blome also indicated that the IMF bailout package for Islamabad will take its final shape in a couple of days.
“The United States is ready to cooperate with Pakistan to help on this issue,” Blom told reporters at an event in Islamabad on Tuesday.
The ambassador also expressed Washington’s willingness to assist Islamabad in its ongoing challenge of terrorism.
Pakistan has been in turmoil for months following the impeachment of former Prime Minister Imran Khan in April.
Clashes broke out on Tuesday between the police and Khan’s supporters. Clashes broke out between PTI activists and the police in Lahore’s Zaman Park area, when a team of Islamabad police, along with armored vehicles, arrived at party chief Khan’s Lahore residence and arrested him.