Pakistan Finance Minister Dar Hints At End Of IMF Loan Programme
Pakistan is in acute need of the $6.5 billion loan facility by the Washington-based IMF to stabilise its economy.
Finance Minister Ishaq Dar has hinted that the IMF loan programme to Pakistan may expire on June 30 due to the “restricted time” for its revival but asserted that the cash-strapped country would not default, a media report said on Thursday.
Pakistan is in acute need of the $6.5 billion loan facility by the Washington-based International Monetary Fund (IMF) to stabilise its economy.
While speaking to a delegation of a regional business body on Wednesday, Dar said, “Our efforts are aimed at completing the second IMF programme in the country’s history, although time has been restricted and the programme is ending on June 30,” The Express Tribune newspaper reported.
He stressed that the delay was “unfortunate” and the review should have been completed earlier.
Since 1958, Pakistan has signed 22 IMF programmes but failed to complete all, barring the 2013-16 facility, thanks to nearly 18 waivers from the global lender.
Islamabad signed the current 36-month $6 billion Extended Fund Facility in July 2019, which, on request of the then-finance minister, Miftah Ismail, was extended by the IMF by nine months to June 30, 2023, and its size increased to $6.5 billion.
Over the past almost four years, the programme has been derailed at least four times, including on two occasions during the tenure of the current coalition government, and the failure to complete it will further widen the trust deficit between the country and the financial world, the report said.
The government has not yet come up with a credible alternative plan, which has created panic in markets as the Pakistani Rupee is trading in the range of PKR 308 to PKR 313 to a dollar in the open market.
However, Dar asserted that the country was not on the verge of a financial crisis and “will absolutely not default”. He stated that Pakistan completed all technical formalities of the ninth review.
“It is unfortunate that the beginning of this review has been delayed by three months, but we have completed all prior actions,” Dar said.
Amidst the political turmoil, Pakistan's coalition government failed to complete the programme reviews timely, and $2.6 billion remains undisbursed because of disagreements on the ninth review, which also delayed the completion of the 10th and 11th reviews, the report said.
The IMF said earlier this month that there was a significant financing gap that Pakistan was required to bridge before reaching a staff-level agreement.
Dar boasted that he surprised those pundits who predicted Pakistan’s default and the government achieved a current account surplus for two consecutive months.
He pointed out that the country recorded a current account surplus in March and April at $750 million and $18 million, respectively.
Markets and businessmen have, however, been openly critical of the government’s approach to suffocate the economy and the industry by curbing imports, which they feel, is only delaying the looming default.
Dar apologised to the business community for the hardships and inconvenience they face due to the present economic situation but clarified that the current economic team was not responsible for those hardships.
The minister said that the country had repaid $5.5 billion of commercial loans, of which China rolled over $2 billion once it “understood” that Pakistan had completed its requirements for the release of funds by the IMF.
Regarding the remaining $3.5 billion in loans from non-Chinese commercial banks, Dar said, “We are expecting that a substantial part of this will be returned once the staff-level agreement is reached because it is always renewed and they (banks) are always there to do business.”
So far, the United Arab Emirates, Saudi Arabia and China have given Pakistan assurances of assistance in March and April that will cover some of the funding deficit.
According to sources, owing to an estimated $25 billion external debt repayment, including the interest on loans, and the need to finance the current account deficit, the Ministry of Finance has advised the government to negotiate a new deal with the IMF.