$6 billion financing plan remains elusive

The International Monetary Fund (IMF) on Thursday did not accept Pakistan’s request to reduce the additional loan requirement to $5 billion, as its deputy managing director sought further clarifications about the viability of an official plan to raise the loans.

The Ministry of Finance did not report any breakthrough after a virtual contact between Finance Minister Ishaq Dar and IMF Deputy Managing Director Antoinette Monsio Sayeh.

An official handout by the ministry reproduced content almost similar to what had been reported a day earlier after a meeting between Dar and IMF Director Jihad Azour. The points of discussion and the responses too remained almost the same during the second consecutive day.

The virtual contact was established the day a judicial and constitutional crisis further deepened in Pakistan. The National Assembly’s decision to reject a Money Bill moved to give funds for elections and the Supreme Court of Pakistan’s interim order that barred the government from implementing another law passed to streamline powers of the top judge have further deteriorated the political situation.

The political stability and the supremacy of the Constitution are considered of paramount importance for long term financial relations.

During the meeting, the IMF sought the details of the $6 billion financing plan and also questioned the viability of some of the numbers presented by Pakistani authorities, said the sources. The finance minister gave the breakup of the loans that he has been striving to raise for the past many months.

Pakistan requested the IMF to consider lowering the additional loan requirements to $5 billion due to less than anticipated current account deficit during the current fiscal year.

But some of the members of the IMF were of the view that Pakistan may need even more than $6 billion to increase the foreign exchange reserves to a comfortable level.

It was finally agreed that Pakistan would raise $6 billion and half of it has to be materialized before the staff level agreement, a senior official of the Finance Ministry told The Express Tribune.

Pakistan again assured the IMF that the United Arab Emirates (UAE) would soon give a commitment for the $1 billion loan while Saudi Arabia has already given its consent.

The finance minister shared that all prior actions for 9th Review under the Extended Fund Facility have already been completed and the government of Pakistan is fully committed to fulfill its obligations as agreed with the IMF, according to a press statement of the Ministry of Finance. The finance minister said that all the international obligations have been addressed in time, it added.

 The sources said the IMF did not appear convinced about Pakistan’s claim to comfortably arrange the rest of the $3 billion. It has doubts about arranging over half a billion dollars through outsourcing of the three international airports.

The International Finance Corporation –the transaction advisor -is still at an infancy stage of preparing the transaction structure for the international competitive bidding.

Unlike Wednesday’s meeting, there were no tense moments during the meeting with the deputy managing director. A day earlier, Ishaq Dar had questioned the motives of the IMF Mission Chief by not giving a date for signing the staff level agreement.

Pakistani authorities informed the IMF that at least two foreign commercial banks were in touch but the loan deals cannot be signed until a staff level agreement is reached.

The IMF officials again raised the issue of the petrol subsidy to which Ishaq Dar said the government did not have a plan to implement the scheme.

During a meeting of the National Assembly Standing Committee on Finance, Minister of State for Finance Dr Aisha Pasha said the government was not sure whether it would implement the cheap petrol scheme. She distanced herself from the scheme and said it was conceived by the Petroleum Division.

The gross official reserves held by the State Bank of Pakistan again slipped to $4 billion as of last week –not enough to keep the country afloat till June this year.

The Finance Ministry stated that Ishaq Dar and Ms Antoinette Moniso Sayeh discussed economic and financial policies and reforms of the government of Pakistan and initiatives taken regarding implementation of the prior actions for the ongoing IMF programme.

The finance minister apprised her of the country's economic outlook and shared the government’s initiatives for bringing economic stability leading to growth.

Sayeh appreciated the government’s policies and supported the government’s initiatives in various sectors in terms of implementation of prior actions agreed with the IMF, claimed the Finance Ministry.

 “She further extended her support to continue working together and showed confidence in signing of the SLA very soon,” said the ministry.