Dar puts onus of ‘another IMF programme’ on new govt

Putting to bed once and for all uncertainty over the bailout programme’s future after June, Finance Minister Ishaq Dar on Thursday said the new elected government should negotiate a fresh deal with the International Monetary Fund (IMF).

His remarks came during the question-and-answer session following the unveiling of the Economic Survey 2022-23.

“We need to be clear that the current IMF programme is scheduled to end on June 30,” said Dar in response to a question if the current government’s plan included negotiating a new deal with the Washington-based lender amid calls for Pakistan’s need for another bailout.

“We are hopeful the ninth review is completed successfully, as it is necessary for Pakistan. After this, it will be only fair that it be the prerogative of a new government, after elections, to negotiate any new programme with the IMF.

“At this stage, it would be totally undemocratic and unfair to initiate negotiations on a new programme. Let whoever (wins the election) be the one to decide. They shouldn’t be bound,” said Dar.

The remarks, analysts told Business Recorder, imply that the current government is not thinking beyond June 30, and will be looking towards the caretaker setup to continue Pakistan’s economic stabilisation.

We need to be clear that the current IMF programme is scheduled to end on June 30. At this stage, it would be totally undemocratic and unfair to initiate negotiations on a new programme: Ishaq Dar

‘Plan-B exists’

Dar also said there was a ‘plan-B’ in case there is no deal on the current review.

“We have a ‘plan B’, if God forbid, we are dragged to a corner. We cannot allow ourselves to default,” said Dar.

“As compared to our external obligations of $100 billion, Pakistan’s assets run in trillions of dollars,” he said. “Our gas pipeline infrastructure, alone, amounts to $40-50 billion.

“Yes, we are facing a liquidity crunch, but that is due to stupidity (of the past government) over external account spending,” exclaimed Dar.

The finance minister said tax collection has witnessed a shortfall due to import contraction measures that were implemented to ensure the government can meet sovereign obligations.

“Our estimate for FBR’s (Federal Board of Revenue) tax target has been revised, which will be shared tomorrow,” he said, referring to the federal budget 2023-2024 that is due to be announced on Friday.

The IMF programme

In response to Dar’s comment, an analyst, on condition of anonymity, said the IMF programme will not be completed in its “true sense”. The programme, due to end in June, is stalled at the ninth review since November last year.

“The programme ends in June, and we know what the IMF said today with regards to clubbing the reviews,” the analyst told Business Recorder.

On Thursday, Reuters quoted Esther Perez Ruiz, the IMF’s resident representative for Pakistan, as saying that Pakistan needs to satisfy the lender on three counts, starting with a budget to be presented on Friday, before its board will review whether to release at least some of the $2.5 billion still to be disbursed under the current programme.

“As communicated to the authorities, there can be one remaining Board meeting under the current EFF at end-June,” Perez Ruiz said in an email response.

“To pave the way for a final review under the current EFF, it is essential to restore the proper functioning of the foreign exchange market, pass a FY24 budget consistent with programme objectives, and secure firm and credible financing commitments to close the $6 billion gap ahead of the Board,” she added.

The IMF had tasked Pakistan with securing external financing commitments for $6 billion from other sources, but so far it has only obtained commitments for $4 billion, mostly from Saudi Arabia and the United Arab Emirates.

Pakistan has barely enough foreign currency reserves to cover one month of imports. It had hoped to have $1.1 billion of the funds released in November - but the IMF has insisted on a number of conditions being met before it makes any more disbursements.

The country is reeling from an economic crisis with inflation running at a record 37.97% in May. The government has imposed taxes, raised energy tariffs and scaled back subsidies in an attempt to persuade the IMF to unlock funding, and its central bank has also raised the key policy rate to a record 21%.

The IMF has conducted just eight of the ten reviews that were to take place during the EFF, and the last one took place in August last year.