The elusive deal

Another week has passed — well, very nearly — without Pakistan being able to have the IMF loan programme revived. A staff-level agreement on the resumption of the $7 billion bailout package — as also confirmed by Finance Minister Ishaq Dar while speaking on the floor of the Senate yesterday — now hinges on if and when the government is able to get written guarantees from friendly countries, including Saudi Arabia, UAE and Qatar, on bridging the external financing gap. This is despite the fact that a series of harsh policy measures — raising the interest rate to an unprecedented 20%, imposing a Rs3.82 per unit debt servicing surcharge on a permanent bases, and allowing the foreign exchange rate to match for outflows to Afghanistan — have already been met.

No wonder IMF’s “uncustomary” attitude is being seen with skepticism and has even raised strategic questions. Taking the opportunity of Dar’s presence in the Upper House, Senator Raza Rabbani said “the question arises if the delay [in finalising the bailout deal] is being made because of some sort of pressure to be exerted on Pakistan’s nuclear [programme].” Even though Dar assured of no compromise on the country’s nuclear prowess and promised that the moment the staff-level agreement was finalised, it would be put up on the website of the finance ministry, the delay is indeed worrisome — given the soft default that, according to many an expert, has already happened. As a consequence of this delay, the dollar has been inching up by a rupee or two every day to reach Rs282.42 in the inter-bank dealing and Rs285.50 in the open market yesterday. The stock market too is shaky, with the KSE-100 index shedding 179 points on the last trading day.

More so, the political uncertainty prevailing in the country since the successful vote of no-confidence against the government of Imran Khan in April 2022 is reportedly yet another factor causing a delay in culmination of a deal with the IMF. It is quite understandable for the global lender to be worried about whether the future political setup in the country will respect any deal it signs with the current authorities. Therefore, an assurance from the opposition must also be on the mind of the IMF negotiators, even though it is highly unlikely that the incumbent government could furnish any such assurance amid the prevailing political wrangling in the country that has grown even more intense of late.

With these financial and political assurances not yet secured, or are in the works, the fear of a default — a hard one — on foreign obligations is staring us right in the face. And the claims of the deal “coming soon” being made by the government almost every day have remained unfulfilled. It’s a race against time. The government must get it done — and get it done forthwith.

Published in The Express Tribune, March 17^th, 2023.

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