Roving Periscope: Islamabad gets some relief—with yet another IMF bailout
Virendra Pandit
New Delhi: The Washington-based International Monetary Fund (IMF), under the ‘strategic influence’ of the US, does not want a nearly bankrupt Pakistan to get any more debt-trapped by China than it already is. So, the global lender has thrown yet another lifeline to a self-proclaimed ‘nuclear-armed’ country that knows very well how and whom to successfully blackmail and when.
The IMF has reached a Staff-Level Agreement (SLA) with Pakistan on the final review of a USD 3 billion bailout wherein Islamabad will receive USD 1.1 billion after approval of the Fund’s Executive Board, the lender said on Wednesday.
The funds are the final tranche of a USD 3 billion last-gasp rescue package Pakistan secured last summer, which averted a sovereign debt default. Islamabad is also seeking yet another long-term bailout, the media reported.
“The agreement recognizes the strong program implementation by the State Bank of Pakistan and the caretaker government in recent months, as well as the new government’s intentions for ongoing policy and reform efforts to move Pakistan from stabilization to a strong and sustainable recovery.
“Given the timing of the Second Review mission, immediately following the formation of the new cabinet, we expect the review to be considered by the IMF’s Board in late April,” the Fund said in a statement.
Nathan Porter, the IMF mission chief in Pakistan, said: “Pakistan’s economic and financial position has improved in the months since the first review, with growth and confidence continuing to recover on the back of prudent policy management and the resumption of inflows from multilateral and bilateral partners.”
However, he added that growth was “expected to be modest this year” and that inflation remained well above target.
“Ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities,” he said, adding that the new government “is committed to continuing policy efforts.”
The current government will continue its “efforts towards broadening the tax base, and continue with the timely implementation of power and gas tariff adjustments to keep average tariffs consistent with cost recovery while protecting the vulnerable through the existing progressive tariff structures, thus avoiding any net circular debt accumulation”.
Moreover, the statement said, the central bank remained “committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility”.
Following the IMF statement, shares at the Pakistan Stock Exchange (PSX) climbed up by 374 points.
On Tuesday, Finance Minister Muhammad Aurangzeb and Nathan Porter led their respective teams at the final customary concluding session. Both sides remained tight-lipped because of IMF communication protocols, the media said.
Last year, the IMF Executive Board approved the nine-month arrangement with Pakistan “to support its economic stabilization program.” The approval had allowed for an immediate disbursement of USD 1.2 billion, with the rest to be phased over the program’s duration — subject to two quarterly reviews.
In November 2023, an SLA was reached between the IMF staff and Islamabad regarding the first review under Pakistan’s SBA. This agreement was contingent upon approval by the IMF’s Executive Board.
In January, the IMF released the much-awaited USD 700 million tranche, shoring up the State Bank of Pakistan’s (SBP) foreign reserves following a successful first review by the Executive Board of the IMF under the agreement.
Pakistan now eyes a “longer and larger” economic bailout package with the IMF, as indicated by the newly-elected Finance Minister Aurangzeb Khan in his first formal media interaction.
Meanwhile, an IMF spokesperson also confirmed that the Fund supported formulating a new economic program for Islamabad if the new government sought one.
