Big setback for flood-ravaged Pakistan seeking funds from IMF
In a major setback to Pakistan, the International Monetary Fund (IMF) has refused to send a team to the country to complete the review for $1.18 billion fund, part of the $6 billion bailout package Islamabad secured in 2019.
Pakistan is in the middle of an economic crisis and is staring at default. It desperately wants the IMF to complete the review, which has been pending since September last year.
The global financial institution wants Islamabad to carry out more reforms and end subsidies, which the country cannot afford. Among the conditions, the IMF has put before Pakistan include withdrawing electric subsidies, linking gas prices to the international market, and free-floating dollars.
Pakistan’s national daily Dawn on Tuesday reported that the government’s fear of losing popularity before the elections appeared to be keeping the country from finalising the deal with the IMF. It said both sides were still discussing the seven demands that the global institution wants Islamabad to accept before it resumes economic assistance to Pakistan.
According to Dawn, Shehbaz Sharif’s government, which is already on a very weak turf, fears that implementing some of these demands will hike the price of essential items across the board and backfire in the upcoming national elections.
Pakistan is witnessing record inflation as prices of several households have risen nearly 50 percent year-on-year. Its forex has depleted below $5 billion, enough to service only three weeks of imports. The country’s central bank Monday said the completion of the pending review under the IMF’s fund facility was critical for reducing uncertainty.
In the last few weeks, Pakistan has taken several measures to arrest the economic slide and save forex reserves. It is now planning to cut 10 per cent salary of the government’s employees, India Today reported on Wednesday. The government is considering cutting down expenditure on ministries by 15 per cent. It also plans to reduce federal ministers, and ministers of state while the remaining should work on a pro-bono basis.
Earlier this month, Pakistan’s Prime Minister Shehbaz Sharif dialled IMF Managing Director Kristalina Georgieva and urged her to relax conditions regarding an increase in energy prices and imposition of more taxes. He sought relaxation in the demand to increase electricity prices, The Express Tribune reported citing sources.
According to the daily, these two issues are the major stumbling blocks in reaching an understanding for a staff-level visit by the IMF to Pakistan. Reports suggest that Sharif has now indicated that his government is ready to accept the IMF’s conditions so that the review can be concluded.