PM in last-gasp bid to revive IMF talks

Forex reserves slips to a dangerous level of $4.5 billion

ISLAMABAD:

 

With Pakistan’s official foreign currency reserves slipping to a dangerous level of $4.5 billion because of major debt repayments, Prime Minister Shehbaz Sharif has requested the International Monetary Fund (IMF) managing director to immediately send over a team to the country to start review negotiations for the next tranche of its loan.

While speaking at the inauguration of Hazara Electric Supply Company (HAZECO) in Islamabad, the premier also confirmed a story of The Express Tribune that he had a telephonic conversation with IMF Managing Director Kristalina Georgieva on Thursday.

“I asked her to send an IMF team for the completion of the pending 9th review of the programme so that the next loan tranche is released,” he told the gathering while referring to his telephonic conversation with Georgieva a day earlier. “She assured that the mission will visit [Pakistan] in the next two to three days.”
However, the finance ministry sources said no dates for the IMF review mission had been finalised yet.

Finance Minister Ishaq Dar would leave for Geneva along with PM Shehbaz and meet IMF officials on the sidelines of a conference there. The conference has now been lowered to a climate resilience event from a donors’ conference because of lack of interest by major players.

The premier’s direct intervention in the IMF programme talks suggests that the matters have slipped out of the hands of the finance ministry.

The 9th review talks have been pending since October last year, resulting in the withholding of a $1.1 billion loan tranche. Pakistan is keen to complete the 9th review so that the World Bank and Asian Infrastructure Investment Bank (AIIB) may also release their loans.

Dar held a virtual meeting with Jin Liqun, the president of the AIIB, requesting him to provide more loans.

PM Shehbaz disclosed his conversation with the IMF’s head the day Pakistan repaid two more foreign commercial loans totalling $1.02 billion.

Pakistan paid back $600 million to the Emirates NBD Bank and $420 million to the Dubai Islamic Bank on Friday, according to government officials.

After the fresh debt repayments, the official foreign exchange reserves have dropped to about $4.5 billion -- sufficient for only 25 days of import cover.
No major inflow has been reported in the first week of January. The central bank had reported on Thursday that as of December 30, 2022, the foreign exchange reserves stood at $5.6 billion, which have now been further depleted.

However, Pakistan is expecting a refinancing of $700 million by the Chinese Development Bank and $3 billion cash injection by Saudi Arabia -- what Dar said would arrive “in days”.

The prime minister also disclosed that Georgieva inquired whether or not China and Saudi Arabia were supporting Pakistan.

“Because of their huge financial exposures, I would be surprised if China and Saudi Arabia do not link their financial assistance with the IMF programme that oversees Pakistan,” said Haroon Sharif, a former chairman of the Board of Investment, while speaking during Express News’ show – ‘The Review’.

Haroon added that there would be a political and diplomatic cost for major financial reliance on Saudi Arabia and China.

An official handout released by the PM’s Office after his speech read that the IMF managing director called premier Shehbaz on the phone.

However, IMF Resident Representative Esther Perez did not reply to a question whether the call had been requested by the global lender or Pakistan.

The official handout further stated that Georgieva had “expressed her deep sympathy and concern on the human and material losses due to the recent floods and reiterated her commitment to help Pakistan in this difficult period”.

“The prime minister thanked the managing director for her concern on the fallout of the floods and extended an invitation to [her] to participate in the Climate Resilient Pakistan Conference [in] Geneva,” it added.

However, the IMF MD did not accept the invitation to travel to Geneva.

“The managing director thanked the PM for the invitation but explained that as the IMF Board meetings had been prefixed for 9th and 10th of January, she will only be able to join the conference virtually,” according to the PM's Office.

Sources said as a practice, in absence of the managing director, the first deputy MD of the IMF chaired the board's meetings.

The prime minister assured Georgieva that Pakistan was committed to successfully completing the ongoing IMF programme and expressed his gratitude to her for “her understanding and empathy of the challenges” that the country had been facing.

PM Shehbaz assured her that, unlike its predecessor, the incumbent government would abide by its commitments with the IMF without further burdening the people.
The review talks are delayed because of differences over exchange rate policies,

restrictions on imports, demand for imposition of additional taxes, and increasing the electricity prices to settle roughly Rs500 billion in circular debts.

The prime minister said he had “sensitised” the IMF MD over the country’s economic condition adversely affected by the floods and made it clear that his government had already taxed the rich but could not place more burden on the poor.