Pakistan debates merits of going to IMF

NSC briefed on deteriorating macroeconomic indicators

ISLAMABAD : As a technical assistance team of the International Monetary Fund (IMF) has concluded its visit to the country, the top leadership is divided over whether or not to seek another bailout package from the Washington-based lender agency amid a deteriorating macroeconomic situation.

The team concluded its week-long visit on Tuesday, said sources in the Ministry of Finance.

IMF Resident Representative for Pakistan Teresa Daban Sanchez confirmed that a team of technical experts visited Islamabad.

“I can confirm that upon the request of Pakistani authorities a small team of technical experts visited Islamabad during June 27 to July 3 to support the ongoing capacity building efforts in macroeconomic modelling,” Sanchez told The Express Tribune.

The team was led by Ricardo Llaudes and included Sanchez, Maxym Kryshko, Jongsoon Shin, Hua Chai and Tasneem Alam, the sources said.

They said the main purpose of the visit was to gauge the macroeconomic situation of the country and added the team came on the request of the Ministry of Finance.



The National Security Committee – the joint forum of the civilian and military leadership – was also given a presentation on the deteriorating macroeconomic situation by the ministry on Friday.

In addition, the NSC reiterated a firm commitment to fulfill obligations made to the Financial Action Task Force (FATF) under the Action Plan, regarding measures to combat money-laundering and terror financing.

The 26th meeting chaired by Prime Minister Justice (retd) Nasir-ul-Mulk discussed the details of the Action Plan and the way forward.

The Committee appreciated the efforts of the finance minister and her team at the forum. The meeting also reviewed the overall economic situation in the country.

The meeting was attended by Lt Gen (retd) Naeem Khalid Lodhi, Minister for Defence; Abdullah Hussain Haroon, Minister for Foreign Affairs; Shamshad Akhtar, Minister for Finance; Muhammad Azam Khan, Minister for Interior; Syed Ali Zafar, Minister for Law/Information; Chairman Joint Chiefs of Staff Committee General Zubair Mahmood Hayat, Chief of Army Staff General Qamar Javed Bajwa, Chief of Naval Staff Admiral Zafar Mahmood Abbasi, Chief of Air Staff Air Chief Marshal Mujahid Anwar Khan, ISI Director-General Lt Gen Naveed Mukhtar and senior civil and military officials.

Minister for Finance Shamshad Akhtar gave a detailed presentation to the participants about the deliberations during meetings of Financial Action Task Force and International Co-operation Review Group held in Paris.

The NSC’s decision highlights the gravity of the situation and indicates that the military leadership has listed the economy as a matter of national security.

Sources said that the NSC was not satisfied with the way the economy was being handled by the government. It raised concerns over the high level of public debt, impact and rationale of the latest rupee devaluation and high external financing needs for FY 2018-19, sources added.



It was not immediately clear whether the NSC backed the finance ministry to avail the IMF programme. Minister for Information Syed Ali Zafar did not respond to the query of whether the NSC retained the decision not to formally seek the IMF bailout programme.

The interim federal cabinet had barred the finance ministry from engaging with the IMF at any level.

The country had concluded the last IMF programme in September 2016. After its completion, the economy nosedived, primarily because of problems at the external front.

Sources said that the Ministry of Finance was clearly in favour of formally engaging with the IMF due to the worsening external sector position.

However, the country’s top leadership at this stage has certain reservations. “Their main concern is the implications of the next IMF programme on the China-Pakistan Economic Corridor (CPEC),” sources said.

The NSC also asked the finance ministry to implement its earlier decisions on the economy, sources added.

The committee was told that Pakistan’s public debt-to-Gross Domestic Product ratio would cross 72% or roughly Rs25 trillion for FY2017-18. This is far higher than the sustainable level of 50% for developing countries like Pakistan.

“There are also concerns on refinancing public debt, particularly external public debt,” the sources said.

The NSC was given a detailed presentation on the ballooning fiscal and current account deficits, the sources said.

They said that though the final figures are not available, indications are that the current account deficit for FY2017-18 would be over $18 billion.

They said that Pakistan’s external financing needs will be in the range of $25 billion to $27 billion for FY2018-19, and these cannot be met with the assistance from China alone.

China gave about $5 billion to Pakistan in the recently-concluded fiscal year, excluding $1.5 billion as an additional trade financing facility.

Sources in the finance ministry said that due to mounting external financing needs Pakistan will require the IMF, World Bank and the Asian Development Bank’s support.

While giving details of the IMF team visit, the sources said Pakistan shared the provisional macroeconomic indicators with the team.

“However, it [the team] did not share its macroeconomic model with Pakistani authorities,” the sources said.

The IMF team did share its projections with the Pakistani authorities. Their assessment, based on macroeconomic indicators, was that the economic growth would fall below 5% due to a monetary and fiscal tightening in the new fiscal year.

Sources said in case the new government decides to avail the IMF programme, the numbers shared with the team would become the base for setting prior conditions to start negotiations for a another bailout package.