Trouble mounts for Pakistan govt as IMF rejects loan request

Islamabad: A cabinet member on Thursday said Pakistan’s request to lower the requirement of securing USD 6 billion in additional loans had been denied by the International Monetary Fund (IMF), leaving the government with no choice but to try to salvage the agreement, The Express Tribune reported.

Minister of State for Finance Dr Aisha Pasha, in a policy statement delivered during the National Assembly Standing Committee on Finance, stressed that Pakistan’s only choice was to return to the IMF. The committee also addressed the idea of ​​invoking the recently passed contempt of the Parliament law against Finance Minister Ishaq Dar for his persistent absence during the meeting, which was presided over by Pakistan Muslim League-Nawaz (PML-N) MNA Qaiser Sheikh, as per The Express Tribune.

Dr Pasha claimed that Pakistan asked the IMF to take into account lowering the USD 6 billion external funding requirement based on fresh data on the current account deficit, but the Fund declined. The other USD 3 billion was to be arranged after the staff-level agreement, she said, but the IMF insisted on “demonstrating the USD 6 billion”. She went on to say that there was an understanding to arrange USD 3 billion before the agreement.

The statement from the Finance minister showed that the IMF has not altered its position despite a call from Prime Minister Shehbaz Sharif to IMF Managing Director Kristalina Georgieva.

Dr Aisha Pasha replied, “There is no option other than going back to the IMF, and I categorically say there is no Plan B,” when asked if there was a backup strategy in the event that negotiations with the IMF fall through.

She emphasised that the government wanted to continue the IMF programme.

Dr Pasha’s assertion, however, runs counter to Finance Minister Dar’s earlier stance that Pakistan should attempt to cope with or without the IMF.

MNA Ali Pervaiz Malik urged Pakistan to use restraint and avoid taking actions like offering amnesty to citizens who have undeclared foreign currency in their possession.

The IMF has already paid USD 3.9 billion of the overall USD 6.5 billion rescue package during the past four years, with the remaining amount depending upon the conclusion of three outstanding reviews.

MNA Dr Ramesh Kumar blamed Pakistan’s foreign policy course for the protracted delay in restarting the IMF programme.

Dr Pasha asserted that Saudi Arabia, the United Arab Emirates, the World Bank, and Geneva Commitments had made arrangements for Pakistan to receive USD 4.5 billion. She pointed out that only after the staff-level agreement is reached can the remaining USD 1.5 billion be set up.

Speaking to the business community on Thursday, Dar voiced optimism, saying that Pakistan’s external financing is in order and that he anticipates a staff-level deal to be reached this month.

Dr Pasha stated that Pakistan has shared its fiscal year 2020 budget with the IMF, and the government is awaiting the lender’s feedback. She stated that the budget is generally in compliance with IMF recommendations.

According to figures seen by The Express Tribune, the IMF might demand that Pakistan significantly raise its revenue projections and cut back on some expenses. The proposed primary budget surplus is insufficient to meet IMF standards.

Members of the committee voiced dissatisfaction with the government’s choice to share budget figures with the IMF but withhold them from lawmakers.

The PM’s decision to create eight different budget committees prevented the budget strategy paper for the fiscal year 2023-2024 from being finished in time for the meeting, according to Dr Pasha.

The Public Finance Management Act mandates that the Ministry of Finance prepare and release the budget strategy paper by April 15th, as stated by Nafisha Shah of the Pakistan People’s Party (PPP). Pervaiz suggested taking action in response to the finance ministry’s violation of the Act of Parliament.

Concerns regarding import limitations and rumours of unlawful methods being utilised to import products with postponed payments were also addressed by the committee. Dr Inayat Hussain, the deputy governor of the SBP, acknowledged that they are looking into the specifics of these imports and would take enforcement and remedial action as needed, The Express Tribune reported.