It’s been almost two months since the SLA, and there is no update on when Pakistan’s program would be approved by the Fund’s board. Given the current situation, the board meeting will likely not take place in September.
The issue pertains to gross financing gaps where the reliance of both Pakistan authorities and the IMF is on friendly countries—mainly China and Saudi Arabia. The game started with arranging the incremental financing of $2 billion in FY25 and $3 billion in FY26 and FY27. Three countries—China, Saudi Arabia, and the UAE—are now raising concerns about the rollover of $12-16 billion, which we had believed would be straightforward during the SLA period.
Now, game theory is in play. If A country needs finance, that country is to carry the risk of B country not rolling over the existing loans, and that is making A country’s incremental money stuck, as the existing loans are deemed to be stuck. A is waiting for B to move, and B is looking at A.
The IMF finds itself torn between the two.
China is not pleased with Pakistan the way things have been for the last three years or so. Some Chinese circles now perceive Pakistan as an unreliable partner. That is making Saudi Arabia uncomfortable in terms of arranging additional financing.
When the IMF signed the SBA in 2023, it assumed that Pakistan’s debt was sustainable. Even with restricted imports, pending dividend payments, over 30 percent inflation, and a dire global financial situation, the IMF considered Pakistan’s debt sustainable.
All these indicators have improved significantly. If the Pakistani external debt was sustainable then, it should be sustainable now. And if it is not sustainable today, how could it be sustainable back then? That is why both the IMF and Pakistan authorities are working hard to obtain gross financing and rollovers.
Thus far, there has been minimal success in this endeavor. Some commentators are easily drawing connections between the current domestic political situation, the establishment’s dealings with the PTI, and the way PMLN leader Ishaq Dar is once again blaming the IMF for delaying the disbursement to Pakistan. It’s a déjà vu - of 2023.
Dar’s statement is not at all responsible; it’s divergent from reality and not in the best interest of the country, which desperately needs the IMF program to ensure debt sustainability. Here one can smell politics.
This coincides with a softening of the establishment’s stance towards the PTI, as evidenced by their decision to allow the party to hold a Jalsa on Sunday. The recent press conference’s language also suggests a softening of the establishment’s stance towards the PTI. This may also have something to do with friendly countries potentially demanding political stability before proceeding further.
Whatever the case is, the IMF is delayed. The situation will remain fluid until the money comes in.
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