Govt scrambles as IMF rejects Pakistan’s loan request

‘No option other than going back to IMF, no Plan B,’ says Aisha Pasha

ISLAMABAD:

A cabinet member revealed on Thursday that the International Monetary Fund (IMF) has rejected Pakistan’s request to lower the requirement of arranging $6 billion in new loans, leaving the government with no alternative but to try and revive the deal.

In a policy statement during the National Assembly Standing Committee on Finance, Minister of State for Finance Dr Aisha Pasha emphasised that returning to the IMF was Pakistan’s only option.

During the meeting chaired by Pakistan Muslim League-Nawaz (PML-N) MNA Qaiser Sheikh, the committee also discussed the possibility of using the newly enacted contempt of the Parliament law against Finance Minister Ishaq Dar for his continued absence.

According to Dr Pasha, Pakistan requested the IMF to consider reducing the $6 billion external financing requirement based on new current account deficit data, but the Fund did not agree. She explained that there was an understanding to arrange $3 billion before the staff-level agreement and the remaining $3 billion after the agreement, but the IMF was insisting on “demonstrating the $6 billion.”

Despite a call by Prime Minister Shehbaz Sharif to IMF Managing Director Kristalina Georgieva, the IMF has not changed its stance, as indicated by the minister of finance’s statement.

When asked about a Plan B in case talks with the IMF fail to yield positive results, Dr Aisha Pasha responded that, “There is no option other than going back to the IMF, and I categorically say there is no Plan B.” She reiterated that the government’s aim was to pursue the IMF program.

However, Dr Pasha’s statement contradicts Finance Minister Dar’s previous position that Pakistan should try to manage with or without the IMF.

MNA Ali Pervaiz Malik cautioned against hasty decisions, suggesting that Pakistan should exercise patience and not consider steps like granting amnesty on undeclared foreign currency held by Pakistani citizens.

Of the total $6.5 billion bailout package, the IMF has disbursed $3.9 billion over the past four years, with the remaining amount contingent upon the completion of three pending reviews.

MNA Dr Ramesh Kumar attributed the continued delay in reviving the IMF program to Pakistan’s foreign policy direction.

Dr Pasha claimed that Pakistan has secured arrangements for $4.5 billion from Saudi Arabia, the United Arab Emirates, the World Bank, and Geneva pledges. She noted that the remaining $1.5 billion could only be arranged once the staff-level agreement is achieved.

Dar expressed optimism on Thursday, stating that Pakistan’s external financing is in order, and he expects a staff-level agreement to be signed this month while speaking to the business community.

Dr Pasha mentioned that Pakistan has shared the budget for the next fiscal year with the IMF, and the government is awaiting the lender’s comments on the budget. She claimed that the budget is broadly in line with the IMF guidelines.

However, numbers seen by The Express Tribune, the IMF may require Pakistan to substantially increase revenue targets and reduce certain expenditures. The proposed primary budget surplus falls below the IMF’s requirements.

Committee members expressed disappointment over the government’s decision to withhold budget numbers from parliamentarians while sharing them with the IMF.

The meeting also aimed to discuss the budget strategy paper for fiscal year 2023-24, but Dr Pasha explained that the paper was not ready due to the PM’s decision to establish eight different committees on budget matters.

Dr Nafisha Shah of the Pakistan People’s Party (PPP) highlighted that the Ministry of Finance is legally obligated to prepare and release the budget strategy paper by April 15th, according to the Public Finance Management Act. Pervaiz recommended taking action against the finance ministry for violating the Act of Parliament.

The committee also addressed concerns about restrictions on imports and reports of illegal means being used to import goods on deferred payments. Deputy Governor SBP Dr Inayat Hussain confirmed that they are investigating the details of these imports and will take enforcement and corrective measures as necessary.

Published in The Express Tribune, June 2^nd, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.