Pakistan awaits relief with bated breath ahead of IMF meeting today

The all-important executive board meeting of the International Monetary Fund (IMF) is to be held in Washington on Monday (today) where the provision of credit to Pakistan’s bailout package will be considered.

It is pertinent to note that Pakistan has sought a minimum of $37 billion in loans and investments, of which $1.17 billion would be immediately disbursed to Pakistan and nearly $4 billion would be granted over the remainder of the fiscal year should the international monetary lender agree.

The IMF is to take a decision, after the seventh and eighth reviews of Pakistan while the country has applied for a one-year extension in the programme period till June next year.

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Earlier this week, sources in the Ministry of Finance had said that during talks for the completion of the 7th review of the bailout package, the global lender significantly revised its projections for the current fiscal year compared with the assessment that it had made at the time of the last review.

The IMF has shaved Pakistan’s previous year's economic growth forecast by 1% to 3.5%. But the major adjustment is being made in the inflation rate.

The revised projections will be shared with the IMF board that is going to meet on August 29 (today). After the approval of the board, the IMF will release the medium-term macroeconomic framework projections.

In this week’s monetary policy statement, the State Bank of Pakistan said that the floods caused by unusually heavy and prolonged monsoon rains created downside risks for agricultural production, especially cotton and seasonal crops, and could weigh on growth this year. But it maintained an earlier projection of 3% to 4%.

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It may also be noted that it is also expected that the board will grant the quota of Saudi Arabia’s loan to Pakistan after acting State Bank of Pakistan (SBP) Governor Murtaza Syed had said last week that the friendly Gulf countries – Qatar, Saudi Arabia and UAE – have devised their strategies to cumulatively provide $4 billion financial support to Pakistan over the next one year.

Earlier, Pakistan had signed a letter of intent (LoI) with the IMF to get its extended $7 billion loan programme revived. In mid-July, the country achieved a staff-level agreement with the leading global creditor. The IMF had conditioned revival of its loan programme to Pakistan acquiring additional financing guarantee worth $4 billion from friendly countries.

The K-P curve ball

Just three days before the revival of the multi-billion-dollar lending by the IMF, the Khyber-Pakhtunkhwa (K-P) government had apparently tried on Friday to derail the programme in an attempt that Finance Minister Miftah Ismail had termed a “conspiracy against Pakistan”.

In a letter to Miftah, K-P Finance Minister Taimur Saleem Jhagra had linked the provincial cash surplus in this fiscal year – which is a part of Pakistan’s deal with the IMF – with the clearance of the Rs100 billion claimed liabilities.

Under the IMF deal, the K-P government is required to generate a Rs117 billion cash surplus, which it has already consented to provide through a memorandum of understanding. Ismail is a co-signatory of the Letter of Intent (LoI) dispatched to the IMF a few days ago for the revival of the programme.

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“Please note that in these conditions [floods], and without the resolution of the issues highlighted previously, for the province of Khyber-Pakhtunkhwa to actually leave a surplus will be next to impossible,” Jhagra had written in the communique sent to Minister Miftah on Friday.

The following day (Saturday), Jhagra had defended the letter and said the province has a flood situation on hand that "takes precedence over all else".

On the war of words between Miftah and Jhagra, senior Pakistan Tehreek-e-Insaf (PTI) leader and General Secretary Asad Umar had said the federal minister should not "blame others for his incompetence", adding that PML-N supremo Nawaz Sharif was not happy with Miftah’s performance.