IMF seeks more funding assurances

LAHORE: Prime Minister Shehbaz Sharif on Saturday emphasised that Pakistan has met all the “tough” conditions laid forth by the International Monetary Fund (IMF) and now the lender has “no excuse” to delay the staff-level agreement.

PM Shehbaz, while addressing a ceremony after reviewing the construction work on the six-lane overhead bridge of Imamia Colony Railways Crossing Shahdra N-5, lamented that the coalition government was making all-out efforts to convince the IMF officials to release the tranche of $1.1 billion.

Acknowledging the woes of the people because of historic high inflation, the premier accepted that Pakistan had “no choice” but to accept all the strict conditions laid forth by the IMF to secure a much-awaited bailout tranche from the Washington-based lender.

Pakistan signed a $6.5 billion bailout package with the IMF in 2019 but has repeatedly reneged on conditions and so far just $3 billion has been released.

A day earlier, the United Arab Emirates (UAE) confirmed financial support of $1 billion to Pakistan, making it the third country after Saudi Arabia and longtime ally China to come to Pakistan’s assistance, as external financing is needed to fully fund the balance of payments gap for the fiscal year that ends in June.

The commitments were one of the IMF’s last requirements before approving a staff-level pact to release a tranche of $1.1 billion, delayed for months, that is crucial for Pakistan to resolve an acute balance of payments crisis. “Such tough conditions were set which weren’t easy for Pakistan to fulfill,” the premier said, adding that in the last one-and-a-half-month, the coalition government has made a lot of efforts.

At a Thursday afternoon briefing in Washington — where the World Bank Group is holding its spring meetings — Azour also dispelled the impression that the Fund was dictating terms to Pakistan. The same day, IMF Managing Director Kristalina Georgieva also said the IMF hoped to complete its current programme with Pakistan successfully. “My hope is that with the goodwill of everyone, with the implementation of what has been already agreed by the Pakistani authorities, we can complete our current programme successfully,” Georgieva had said at a news briefing in Washington.

Meanwhile, the IMF said on Saturday it was still awaiting the necessary financing assurances for bridging the external gap for paving the way for the completion of the outstanding 9th Review under the Extended Fund Facility (EFF) programme.

The IMF’s Mission Chief, Nathan Porter, in a statement issued to the media in the early hours of Saturday morning stated: “We welcome the recent announcement of important financial support to Pakistan from key bilateral partners. During the meetings between the Pakistani delegation and IMF staff and management, there was agreement on the need to maintain strong policies and secure sufficient financing to support the authorities’ implementation efforts.”

He further said that “the IMF is supporting these efforts and looks forward to obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the 9th EFF Review.”

The statement of the IMF’s Mission Chief looked vague as it did not explain explicitly that how much more external financing assurances were required to bridge the financing gap. When contacted, top official sources said Pakistani authorities would have to struggle hard to manage another $1 billion from bilateral partners in order to strike a staff level agreement as the IMF wanted to secure $4 billion assurances before moving ahead towards signing the much-awaited Staff Level Agreement.

Pakistan had already secured additional external financing assurances of $3 billion, including $2 billion from the Kingdom of Saudi Arabia (KSA) and $1 billion from the United Arab Emirates (UAE) respectively, in recent days.

Earlier, the IMF had estimated that the external financing gap stood at $6 billion but Pakistan authorities persistently argued that it would remain in the range of $4 to $5 billion keeping in view the shrinking Current Account Deficit (CAD). The Current Account Deficit stood at $3.8 billion during the first eight months (July-Feb) period of the current fiscal year against $12.07 billion in the same period of the last financial year.

The current account deficit reduced sharply and stood at just $74 million in February 2023 mainly because of compressed imports. Pakistani authorities claimed that the CAD would be restricted to around $4 billion for the current fiscal year but the IMF assessed that it might go up to $5 billion provided the government opted to ease out restrictions on clearance of stuck-up containers at ports. If imports restrictions are relaxed, it might result into hiking the CAD up to $5 billion in accordance with the estimates given by the IMF.

The sources said that the IMF showed some lenient attitude and now asked the government to manage external financing of $4 billion. The Minister for Finance, Ishaq Dar, might have to visit another important country before or after Eid in order to get the additional dollar inflows commitment for striking the IMF deal.

Ishaq Dar has now been making his last ditch efforts to convince the IMF staff for maturing the deal instead of opening up a new Pandora’s box in the shape of opening up discussions on Memorandum of Economic and Financial Policies (MEFP).

Meanwhile, Ishaq Dar held a meeting with President of the Asian Infrastructure Investment Bank (AIIB) and made a request for provision of co-financing of $450 million along with World Bank’s RISE programme and to disburse this budgetary loan programme of $900 million during the ongoing financial year.

According to Ministry of Finance statement issued on Saturday, Ishaq Dar held a meeting with Jin Liqun, President AIIB, virtually through video link from Islamabad as part of the IMF/World Bank Spring meetings 2023. Minister of State for Finance and Revenue Dr. Aisha Ghous Pasha, SAPM on Finance Tariq Bajwa, SAPM on Revenue Tariq Mehmood Pasha, Special Secretary Finance attended the meeting virtually from Islamabad. Whereas Ambassador of Pakistan to the USA Masood Ahmad Khan, Governor SBP Jamil Ahmad, secretary finance, secretary EAD attended in person in Washington.

Ishaq Dar shared the current economic outlook of the country and apprised him of the economic policies and reforms of the government for sustainable economic development. The finance minister thanked the president AIIB for his generous support in rehabilitation and reconstruction efforts in the flood-affected areas in Pakistan.

The president AIIB lauded the relationship between Pakistan and the AIIB and appreciated the economic policies and reforms of the present government for social uplift of the masses. He highlighted the role of AIIB in infrastructure development projects and investment and extended AIIB’s complete support and cooperation to Pakistan.