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ISLAMABAD: The International Monetary Fund (IMF) has confirmed that the new government in Pakistan has reached out to it, seeking support for the country’s balance of payments. It said a delegation of the country would be in Washington this week for a follow-up meeting.
“The IMF looks forward to continuing supporting Pakistan’s authorities on economic policies and reforms to ensure macroeconomic stability in the country amidst the current challenging global economic environment,” IMF’s Resident Representative in Islamabad Esther Perez Ruiz told Dawn.
She also confirmed that as part of the IMF’s “continued engagement with Pakistan” she last Friday met with finance minister-designate Miftah Ismail, ahead of the visit of Pakistan’s delegation to Washington during Spring Meetings.
Top government sources confirmed that a delegation also comprising Secretary Hamed Yaqoob Shaikh and State Bank of Pakistan (SBP) Governor Dr Reza Baqir would be meeting the new IMF mission chief to Pakistan Nathan Porter on Monday evening, besides other fund officials.
Pakistani delegation likely to meet fund officials this week
Efforts were on to ensure that Mr Ismail also joins the Washington meetings physically and hopefully take this opportunity to call on IMF Managing Director Kristalina Georgieva and seek her support for the revival and completion of the stalled fund programme. These sources said former finance minister Shaukat Tarin had sought to arrange a meeting with Ms Georgieva during these meetings as negotiations with the fund staff had stalled following Feb 28 fuel subsidies and tax amnesty announced by former prime minister Imran Khan.
The new finance minister would be more eager to seek blessings of the IMF’s top management at the outset for smooth engagements with the staff to put the programme back on track and ensure foreign inflows for the direly needed balance of payment support. There are, however, at least three issues that the authorities are trying to resolve as the spring meetings (April 18-24) are opening today.
To start with, the government has to notify Mr Ismail as minister/adviser finance even though he has unofficially assumed the responsibility. Then, his name has to be excluded from the Exit Control List on which he was placed soon after his last visit to the US for IMF meetings and still remains. Efforts are already in place for his travel arrangements, including the US visa well in time
Mr Ismail had met the IMF’s resident representative in Islamabad to discuss the revival and completion of the Extended Fund Facility (EFF) along with disbursement of $3 billion outstanding funds to counter the fast depleting foreign exchange reserves amid widening fiscal and current account deficits.
The three-year fund programme worth $3bn got suspended thrice and remained off-track most of the time over the past three years. The fund officials had suggested the authorities to prepare their side of the homework, including corrective measures that could stop the bleeding that particularly started after the last-month relief-cum-amnesty package with financial implications of more than Rs300bn to become the basis for meetings in Washington.
Mr Ismail last week blamed the PTI government for creating an unprecedented economic mess particularly leaving behind domestic and external financial accounts in a precarious position with estimates of fiscal deficit for the current year at a record Rs6.4 trillion or 10pc of GDP against a target of Rs3.99tr and current account deficit estimated at $20bn by end-June this year.
He promised to honour all the contractual obligations of the previous government, including commercial agreements and the IMF programme, saying “we will take the existing programme forward and complete its three reviews”. The possible revival will ensure about $3bn in outstanding disbursement till September 2022.
Former finance minister Ismail had been speaking critically of the relief package announced by former prime minister Imran Khan at the last moment to save the government. In particular, Mr Miftah criticised the tax amnesty scheme, saying there was no justification for it since the government had given a written commitment not to offer such schemes, least the one that also promised amnesty on future incomes as well.
According to Mr Ismail, current account deficit (CAD) for the current fiscal year was estimated at $20bn — by far the highest ever — that meant Pakistan had to fund $6bn CAD on top of about $3bn debt repayments in remaining period of the fiscal year on top of next year’s financing needs of $30bn. The central bank has since reported the forex reserves held by it to have dropped to $10.8bn as of April 8 — which are less than two months of import cover. The fund umbrella was thus inevitable to secure assistance from friendly countries from World Bank and Asian Development Bank or the international bond market.
The $6bn Extended Fund Facility (EFF) approved by the IMF board on July 3, 2019, had remained mostly off-track throughout its 33-month period and should have come to its completion by September 2022 under original schedule.
Published in Dawn, April 18th, 2022
