The International Monetary Fund (IMF) on Friday said that the $1.2 billion 9th review of the bailout programme will be completed once the necessary financing is in place and the agreement is finalised, noting that there was an agreement on the issue between both the sides.
The statement, sent to The Express Tribune, highlights a widening trust deficit between Pakistan and the IMF, as it negates the claim made by the government with respect to meeting all prior actions necessary to complete the 9th review.
The government will also have to satisfy the global lender about the policies that it wants to roll out, including the budget for the fiscal year 2023-24 -- a demand that the finance ministry officials claim was tantamount to changing goalposts.
“The IMF continues to work with the Pakistani authorities to bring the 9th review to a conclusion once the necessary financing is in place and the agreement is finalized,” stated Nathan Porter, the IMF Mission Chief to Pakistan.
Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar had claimed that Pakistan met all the prior conditions agreed for reaching a staff-level agreement and there was no reason for holding back the agreement.
On Thursday, in an article published in an English day, Finance Minister Ishaq Dar had claimed that “Pakistan has already complied with all the prior actions for the 9th review with the IMF”. Dar further wrote that it was expected that the staff level agreement will be signed soon with the IMF which should be followed by the approval of the 9th review by the IMF board.
But Nathan’s statement negated what the Pakistani authorities have been claiming since February 9, when the face-to-face talks ended inconclusively.
Nathan did not explain the quantum of the necessary financing that Pakistan has to put in place to conclude the 9th review for the $1.2 billion loan tranche that has been delayed by seven months now.
The finance minister had said that Pakistan needed $6 billion to bridge the financing gap till June this year. Out of which Saudi Arabia and the United Arab Emirates had assured Pakistan of providing $3 billion but there are no firm assurances for the rest of the loans.
Pakistan’s gross official foreign exchange reserves remain at $4.5 billion. The country needs to pay nearly $4 billion to the world on account of principal and interest on debt, including $1 billion SAFE deposit of China, till June this year.
Since the government does not have a credible financing plan for July-December period of the next fiscal year, the sources said, Pakistan also needs to arrange funds to repay the loans during the first half of the next fiscal year.
The external debt repayments, including interest, for the July-December period amount to $11 billion, said the Finance Ministry sources. Even if China and Saudi Arabia rollover their short-term debts, Pakistan will still need over $4 billion to repay to the international creditors during the first half of next fiscal year. These include payments to the World Bank, the Asian Development Bank, Saudi Fund for Development, Islamic Development Bank and Chinese commercial banks.
Nathan Porter has also mentioned the next fiscal year’s budget in his statement, which the government wants to present around June 10. “In addition, the IMF supports the authorities in the implementation of policies in the period ahead, including in the technical work to prepare the fiscal 2024 budget, which is to be passed by the National Assembly before end-June,” said Porter.
The Ministry of Finance, already struggling to meet other conditions, seemed irritated by the IMF’s new demand. Senior finance ministry officials argued that the IMF should not link the approval of the 9th review with the next year’s budget.
They said that the issue of the fiscal year 2023-24 budget should be taken up at the time of the discussions for the 11th review. “The IMF’s demand is worrisome,” said a cabinet member on condition of anonymity.
Less than two months are left in the expiry of the stalled $6.5 billion IMF programme. There seems to be no possibility that Pakistan and the IMF will conveniently complete the remaining three outstanding reviews of the programme.
Due to Pakistan’s failure to implement the programme conditions on time, the $2.6 billion still remain undisbursed out of the $6.5 billion despite getting a nine-month extension in the programme by former finance minister Miftah Ismail.
The finance ministry sources said that the finance secretary recently urged Nathan Porter to review the demand for an agreement on the next year’s budget.
However, the IMF, already agitated by the government’s contradictory claims about completion of the conditions, may not offer any major relief to Pakistan.
There are concerns that the coalition government may try to unveil a politically-oriented budget, which will make it more difficult to take the country out of the economic crisis in the near future.
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