IMF stresses on ‘staying within agreed policy framework, securing financing’

The International Monetary Fund (IMF) said on Sunday it hopes a peaceful way forward is found, a remark that comes as Pakistan wrestles with a simmering political crisis at a time of severe economic distress.

The IMF also stressed that staying within the policy framework agreed for the review and sufficient financing from partners remain key to regaining macroeconomic stability, amid reports that the government’s action plan would wither in the face of rising political noise.

“We take note of recent developments, and while we do not comment on domestic politics, we do hope that a peaceful way forward is found,” IMF’s Resident Representative for Pakistan Esther Perez Ruiz told Business Recorder via message early Sunday morning.

Pakistan’s bailout programme with the IMF has been stalled at the ninth review since November, while talks on the staff-level agreement have dragged on over securing necessary financing assurances to bridge the balance of payments’ gap.

Pakistan earlier said it has managed to secure $3 billion in commitments – Saudi Arabia’s $2 billion and another billion from the UAE – but reports suggested the amount was around half of what the lender wanted in assurance. The amounts are yet to be deposited with Pakistan’s central bank.

“Staying within the policy framework agreed for the review and sufficient financing from partners to support the authorities’ implementation efforts remain key to regain macroeconomic stability,” Ruiz said.

Analysts say measures that needed to be taken on the domestic front have already been implemented, including additional taxation measures, hike in energy tariffs, and free-floating exchange rate.

Ruiz stressed that these steps were important to stabilise the economy.

“The February mini-budget, the adjustment of energy prices, and the measures aimed at easing import restrictions and a market-determined exchange rate, are important steps to stabilise the economy while supporting the most vulnerable.”

She added that funding commitments announced so far are “welcome”, but there is still a gap.

“The IMF welcomes the announcement of important financial support to Pakistan from key external partners and looks forward to obtaining the remaining necessary financing assurances.”

Pakistan has also told the IMF it will not implement a fuel subsidy programme as the two sides continue to negotiate resumption of the bailout.

Earlier in May, the IMF reiterated that it is working with Pakistan to bring the pending ninth review to conclusion “once the necessary financing is in place and the agreement is finalised”.

Securing commitments from financing partners has become a major challenge for the government that is also faced with a massive crisis on the domestic front.

Pakistan saw a fresh wave of violence earlier this week in the aftermath of Imran Khan’s arrest on Tuesday with protesters ransacking state and private property, prompting the government to deploy army troops in two provinces as well as the federal capital. At least nine people died in the unrest, police and hospitals have said, while hundreds of police officers were injured.

The government made several arrests, which targeted top leadership of Khan’s party – the Pakistan Tehreek-e-Insaf (PTI) – as well as his supporters with reports suggesting more than 4,000 people have been detained.

Khan, freed on bail on Friday, condemned the violence that ensued, but called for protests as he pushed ahead on his call for elections. Talks on holding polls failed earlier.

At the same time, the country’s economy has continued to bear the burden of mounting debt and falling foreign exchange reserves. Talks of default gathered steam again this week before Finance Minister Ishaq Dar moved to pacify markets.