The IMF Fund programme for Pakistan might not be back on track soon

By Special Correspondent

Islamabad: The IMF Fund programme for cash-strapped Pakistan might not be back on track in a structured way as soon as the country’s authorities are grappling with challenging political and economic conditions, a media report said on Friday.

In July of last year the International Monetary Fund Executive Board approved a three-year USD 6 billion loan package to Pakistan to rein in rising debts and stave off a looming balance of payments crisis in return for tough austerity measures, local media reported.

However the programme has been in limbo since January of this year and the second quarterly evaluation of the 39-month facility has not been completed.

“The IMF Fund programme for Pakistan might not be back on track in a structured way as soon as the country’s authorities are dealing with challenging political and economic conditions,” the report said.

Although both sides are currently engaged in setting timelines for revised structural benchmarks, the government wants some nascent feel-good factor in some economic indicators to take root before the IMF’s normally contradiction fiscal and monetary positions come into play, the report said.

Pakistan approached the IMF in August 2018 for a bailout package after the government of Prime Minister Imran Khan took over.

Despite loans from China, Saudi Arabia and the UAE, Prime Minister Khan’s government was forced to turn to the IMF due to increasing economic problems in the midst of the COVID-19 pandemic.

In the same direction, according to informed sources, the government wants to extend the construction support package until June instead of its end in December, as it drives industrial sector activities and growth in related areas, while foreign exchange reserves and exchange rates are in a comfortable position due to better remittances.

Special Secretary and Finance Department spokesperson Kamran Ali Afzal said that consultations with the IMF were conducted on a regular basis, often twice a day on structural benchmarks and their timing.

It decided that the approval of two main bills relating to the National Electric Power Regulatory Authority (NEPRA) and the State Bank of Pakistan (SBP) would become a “priority step” and that a way forward for energy sector reforms and revenue generation would be necessary for the “formal restoration of the programme.”

His understanding was that the two laws would become prior acts because they were not linked to COVID-19, but the reforms of the power sector and revenue side could be readjusted as they were influenced by the pandemic and remained key challenges.

He said that the slippage on systemic metrics under the IMF programme had to become a prior intervention in the follow-up review “unless the Fund gives an exception.”

Responding to the issue, he said that the Fund’s formal evaluation mission would be organised as soon as the advisory and consultative discussions took a clear path.

Afzal said that the second wave of coronavirus had put the country in a difficult situation, otherwise things were going in the right direction.

He said that revenue collection had risen by 4.7% in four months and that “concrete signs of recovery are emerging” as in the form of changes in large-scale production and some crops, but it was too early to conclude that aggregate growth was also emerging.

Afzal said that not only the IMF, but also other lenders, such as the World Bank and the Asian Development Bank, have assisted the government in tough times and have been engaged in advisory roles that were positive.

He said the IMF had extended a USD 1.4 billion rapid financing instrument soon after COVID-19 broke out early this year, the World Bank advanced its loan programmes and so did the ADB and Asian Infrastructure Development Bank.

(Inputs from PTI)

Leave a Reply

Your email address will not be published. Required fields are marked *