IMF board delivers a tough message over new bailout

A day after approving the $3 billion bailout package, the International Monetary Fund (IMF) board has conveyed its concerns about Pakistan’s past poor record and advised it to complete the new programme to reduce the trust deficit.

On Friday, Prime Minister Shehbaz Sharif also had a telephonic conversation with IMF Managing Director Kristalina Georgieva and assured her that Islamabad was serious this time to bridge the trust deficit.

Highly-placed sources told The Express Tribune that on behalf of the board, the IMF Executive Director Bahador Bijani, communicated the message to Finance Minister Ishaq Dar through a virtual contact.

The contact was made on Thursday – a day after the IMF board approved the $3 billion Stand-By Arrangement (SBA) programme.

Bijani is one of the 24 executive directors on the IMF board and represents the constituencies of Algeria, Ghana, Iran, Libya, Morocco, Pakistan and Tunisia. The sources said that the board had asked Bijani to convey the tough message to Pakistan.

During the board meeting, the directors had expressed their serious concerns about Pakistan’s poor track record in implementing reforms and fulfilling commitments made to the IMF board and the management during the previous programme period, the sources said.

The $6.5 billion Extended Fund Facility could not be completed and the programme expired on June 30th with $2.6 billion remaining undisbursed.

The sources said that Bijani communicated the board’s sentiments to Dar so that there was no complacency in Islamabad after the approval of the new programme for the period of nine months.

The finance ministry did not officially commented. No statement was issued after Dar-Bijani meeting.

A handout issued by the Prime Minister’s Office stated that Georgieva said that “the IMF board was sceptical about Pakistan’s commitment to fulfilling the conditions of agreement due to the past trust deficit”.

However, “in the light of her continued engagement with the prime minister, she assured the board that Pakistan will deliver on its commitments as she had personally met the prime minister and seen his seriousness to deliver”. It added.

She acknowledged the leadership shown by the prime minister.

The IMF board had last discussed Pakistan’s case in August 2022 and was scheduled to meet again in November 2022 to approve the ninth review.

But Pakistan’s case was never discussed until last month when the board informally met to decide whether it should still give another chance to Pakistan despite its poor track record.

During the informal meeting on June 28th, the board decided to remain engaged with Pakistan.

Subsequently, the IMF announced a staff-level agreement with Pakistan on June 30th, which the board approved on Wednesday.

The sources said that Pakistan was conveyed by the IMF board that this was the last chance for Pakistan to improve its poor standing. The board urged Pakistan to implement the new programme and that it would no longer give any concession.

They added that Pakistan had been advised to complete the ongoing programme so that the trust deficit between both sides was minimised.

The IMF’s Director of Strategic Communications Julie Kozack also said on Thursday that “steadfast implementation” of the nine-month Stand-by Arrangement (SBA) was critical to Pakistan’s future”.

“Steadfast implementation is critical to address its large financing needs and support the most vulnerable”, she said in a statement on Thursday.

The communications director emphasised that resolving Pakistan’s structural challenges would likely require continued reforms over the medium-term to underpin the needed economic transformations to strengthen inclusive growth prospects and to create an environment conducive to renewed private capital inflows.

The board members were also critical of Pakistan’s lack of consistency in reforms and its failure to honour its commitments.

It is the 23rd programme that Pakistan signed with the IMF. So far, only one programme (2013-16) could be fully implemented that’s too on the back of a host of waivers against key conditions.

The Pakistani authorities have, so far, shown the resolve to implement the current programme, although it might prove challenging due to involvement of three different governments from now till the expiry of the programme in March next year.

“The prime minister reassured that he will not tolerate an iota of violation of this agreement”, according to the press statement.

“This government is here till August after which an interim government will take over and he is confident that they will continue to fulfil the obligations”, said prime minister, while addressing the IMF’s concerns about possibility of any slippages.

The prime minister stated that after elections, if the people of Pakistan re-elected his government, he was committed to turn over the economy with the help of the IMF and the development partners.

The finance ministry officials said that the new programme was implementable, as no harsh prior conditions were attached with the next two reviews. They added that it was also in the interest of Pakistan that the trust deficit with the IMF board is minimised.

“For us, it is a matter of satisfaction that despite the concerns expressed by the board, no board member voted against the $3 billion programme,” a senior finance ministry official said.

However, India had bitterly criticised Pakistan’s poor track record and its inability to honour the commitment and at the end it abstained from the voting.

The sources said that the IMF would now closely watch the performance of the Federal Board of Revenue (FBR), the energy ministry and the finance ministry’s ability to deliver on the budget targets.

The IMF would also ensure that Pakistan did not interfere in the exchange market and the interest rates were in line with the future inflation outlook.

The prime minister appreciated Georgieva for her positive approach and her frank comments during the prime minister’s interaction with her in Paris.

Referring to Pakistan’s best quality mangos, the prime minister said it would be an honour to send a gift of Pakistani mangos to the managing director as a token of respect and deep appreciation.