Elusive IMF deal

Recently, Finance Minister Ishaq Dar has, yet again, claimed that the Government of Pakistan has complied with all the prior actions to secure $1.2 billion loan tranche from the IMF. However, the international lender negates the claim and insists on written pledges to bridge the external financing gap. The IMF mission chief says the Fund “continues to work with the Pakistani authorities to bring the ninth review [of the bailout agreement] to a conclusion once the necessary financing is in place and the agreement is finalized”.

The statement, from Nathan Porter, makes it clear that IMF wants Pakistan – which has secured $3 billion worth of written guarantees from friendly Arab countries – to do more to secure the loan tranche in question. Pakistan – according to Fitch Ratings – needs to repay another $3.7 billion in external debt by June 30 this year. While China is expected to roll over a $2.4 billion loan that is maturing next month, Pakistan would still need to repay $1.3 billion; and that is where the contested IMF tranche of $1.2 billion is critical for the country to avert a default on its financial obligations.

But even if the government manages to get the mentioned support from China and secure the IMF loan tranche under review, it will only help the country see off the ongoing fiscal year without defaulting on external payments; and the next fiscal year will begin with a huge requirement of dollars. Pakistan would therefore require another IMF programme and continued financial support from friendly countries to tackle a worsening balance of payments crisis. The situation warrants an out of the box approach, centring around mobilising indigenous resources and tapping the investment potential of the overseas Pakistanis. That this calculus of borrowing and repaying is not sustainable for long goes without saying.

Published in The Express Tribune, May 8^th, 2023.

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