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EDITORIAL: The IMF’s (International Monetary Fund’s) ninth review is pending for as long as Ishaq Dar is the finance minister. And from day one, the finance minister and others in the government have been hoping the IMF’s pending staff-level agreement to come through. The finance minister is still hopeful that the agreement will take place ‘soon’.

However, markets are not taking his words seriously. In the history of his current tenure that began in October 2022, there have been quite a few incidents that show how markets lost their confidence in him. When he joined the Shehbaz Sharif-led cabinet, he became fixated on his ‘great idea’ of currency. There were two anti-market policies running parallel – one was of imports restrictions and the other was of currency fixation to an artificial peg. The blend did not work altogether. Parallel exchange rate markets were developed, offering different rates. And the IMF team did not come for technical talks (in February) before the currency peg was to let go.

That was the time when the Dar bubble was busted after four months in power. That was the time when the currency lost any inherent strength it had. Had that artificial peg not been imposed, experts are of the opinion that the PKR/USD parity could have been under 250. And the fundamentals suggest the same too. However, Dar and his fixation seem to have done irreparable damage.

The question is what is likely to happen to the IMF programme. And why is the SLA (staff-level agreement) still pending when the government has undertaken all the tough measures it has in hand to comply with the IMF’s prior conditions. The issue is debt sustainability and that is extremely important for the IMF.

For the external debt to be sustainable, the country’s foreign reserves have to be at a certain level. Given the current account and financial account position and commitments of rollovers, the gap is estimated at dollar 7 billion by the IMF and the government was negotiating it to be around dollar 5 billion. The agreed number is close to dollar 6 billion. That has to be pledged before the SLA and has to be in the kitty before IMF’s board approval.

Out of this dollar 6 billion amount, the government has a commitment of dollar 3.5 billion assured: dollar 2 billion from Saudi Arabia, dollar 1 billion from the UAE and dollar 0.5 billion from multilaterals. The remaining dollar 2.5-3 billion is missing. The finance ministry was giving the impression that the impediment to the release of tranche was dollar 3 billion from Saudi Arabia and the UAE; and with these commitments, the SLA should be on its way.

However, they were double accounting for some of the multilateral loans. And some commitments were assumed to be part of gross financing needs without any regard to the timelines of those commitments. Either the government failed to do the basic arithmetic right or the exaggerated exuberance was willful and deliberate.

Whatever the case may be, one thing is crystal clear that there is no IMF bailout or tranche without the commitment of remaining dollar 2.5-3 billion gross financing needs. And the issue of debt sustainability is not Pakistan-specific. In other words, it has nothing to do with domestic or international politics. There are many economies under debt distress in the developing world. And the IMF is crystal clear on debt sustainability and pledges from partners before approving loans to any country.

That is one message the Business Recorder team got loud and clear while covering the spring meetings of the IMF earlier this month. Has the newspaper’s team arrived at some wrong conclusion? Ministry of finance is requested to answer this question as early as possible. In this newspaper’s view, however, the ministry is aware of the fact that a wave of confusion and anxiety with regard to the IMF programme pervades the entire country. It’s, therefore, a time a few things were said to clear the air.

Copyright Business Recorder, 2023

Comments

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Tulukan Mairandi (Salem) May 01, 2023 05:04am
SLA (if any) only after July, it seems.
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Jawaid May 01, 2023 06:25am
You can only DAR fool IMF once not twice!
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Tuluks May 01, 2023 06:58am
Pakistan was never a good idea, it is just a breeding ground for terrorism. It's two big distinctions are the 23 IMF programmes (maximum for any country) and one of the world's worst passports (thanks to sending terrorists all over the world). Best way to escape this debt burden and ignominy is to break the country into 4 (the oppressed Sindhis, Baloch and Pashtuns will be happy) and start from scratch again
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Tariq May 01, 2023 09:00am
IMF is not giving any funds to any of the countries that are struggling, simply because these countries are refusing to make the structural changes which are required, China is a big hurdle reorganizing the debt as it is refusing to take a haircut on its debt. China is also stuck as it has over 800 billion dollars that it loaned to countries that cannot pay it back, so China now has to bailout its banks. Pakistan has to divest its SOE as well as Military run enterprises so to make Pakistan competitive
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KU May 01, 2023 09:06am
It pains to see that we talk about a minister who is incompetent and more so a waste of space in this newspaper. Our country's tragic history has many similar characters who have ruined the country's development and it's future.
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Amin Jibril May 01, 2023 09:55am
Pakistan is punished for participating Chinese BRT/CPEC. IMF is trying hard to get Pakistan back to western dependence and subservience. Yes, it's not Pakistan specific. All third world countries face the same fate.
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Tulukan Mairandi May 01, 2023 11:07am
I kept telling that the IMF deal has fallen thru. It's not happening. The glorious iron brother china, who is sitting on higher than mountain forex reserves (2 trillion or 2,000 billion) refused to even give guarantee of $3 billion. Saudi Arabia who is paying billions for football clubs and charging for Zam Zam water, too refused to guarantee its Ummah.
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Tulukan Mairandi May 01, 2023 11:08am
Pakistan should seriously get iron brother china to the table. Give the guarantee or lose Pakistan support for Xinjiang (aka East Turkestan), Taiwan, Democracy, and CPEC will be shut down
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Haq May 01, 2023 01:35pm
With revelation of internal memo (b/w Hina Rabbani & Shahbaz Sharif) by WP. It's crystal clear that Pakistan will realign itself towards China (jump off sinking US ship). COAS recent visit is another proof. Irrespective of political govt (PDM or PML-N or any other, except PTI), future course of direction is being set & visible changes can be seen in coming months
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Mian Nawaz Sharif-Shit May 01, 2023 02:04pm
I note that the Indian trolls are having a good time today with predictions & solutions, including the designing of new countries out of the carcass of the land of the pure.
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AmirSh May 01, 2023 05:20pm
Leave markets alone. No one believes words of wisdom of our Financial Czar-Mr. Ishaq Dar!!
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A May 01, 2023 08:46pm
@Amin Jibril , lol, exactly. Otherwise, Pak is doing a phenomenal job.
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Maq May 01, 2023 09:21pm
@Tuluks, I am not sure what country you belong to and what agenda you are following but you do not seem to understand that wherever west has intervened to correct things eg Iraq, Syria, Yemen, Libya and list goes on, they have worsened the situation and made life difficult for millions of people. So please stop spreading these idiotic ideas and focus on positive things if you can. Pakistan had given the world many world class scientists, doctors engineers and economists. Not to talk about world class non profit organizations like Edhi and Shaukat Khanum etc.
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Najeeb Sadiq May 01, 2023 09:44pm
Trying to befool everyone all the time does not work.And unfortunately our FM is a habitual liar who stands fully exposed at the appropriate fora.
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