ISLAMABAD : Finance Minister Asad Umar’s bullish comments declaring the end of an economic crisis have bolstered confidence ahead of crunch talks with the International Monetary Fund (IMF) on Wednesday, but the country is still likely to need a bailout.
Umar said on Tuesday that “Pakistan’s immediate balance of payment crisis is over” without mentioning the talks with the IMF in Islamabad.
Finance minister’s comments came after Prime Minister Imran Khan visited main allies Saudi Arabia and China.
Premier secured $6 billion in assistance from Riyadh while Beijing promised help cover a projected $12 billion shortfall in foreign exchange to service Pakistan’s debt.
Pakistan’s central bank chief is due to travel to China on Friday to discuss details of what Umar described as a pledge of “immediate money”.
Analysts say the cash will give the economy breathing space and stabilise the currency, which has fallen 25 per cent against the US dollar since December, but it will not solve the country’s balance of payments crisis and avert a second IMF bailout request since 2013, and its 13th IMF rescue since late the 1980s.
“They are going to the IMF because they have to get credit rating approval from the financial markets and that would not happen on the Saudi or Chinese money,” Asad Sayeed, an economist at the Collective for Social Science Research, told Reuters.
Officials are concerned tough IMF conditions would hit growth in the short term, as the IMF is likely to push for reduced spending, further currency devaluations and an increase in interest rates, preventing PM Imran from fulfilling populist campaign pledges.
The Pakistan Tehreek-e-Insaf (PTI) government has pledged to create an “Islamic welfare state” and help build 5 million homes for the country’s poor, where the illiteracy rate is more than 40 per cent.