Ishaq Dar Finance Minister suggests the IMF project will terminate

due to “restricted time,” the loan program may not be restarted, it is said.

ISLAMABAD: On Wednesday, Finance Minister Ishaq Dar apologized to businesspeople for the difficulties they were experiencing as a result of an exceedingly difficult economic environment and warned that the International Monetary Fund (IMF) program may expire on June 30 without revival owing to “restricted time”

Dar addressed a group of representatives from the Rawalpindi, Islamabad, and Sarhad Chambers of Commerce and Industry, “Our efforts are aimed at finishing the second IMF program in the history of the country, even though time has been constrained and the plan is concluding on June 30.

With the exception of the 2013–16 plan, Pakistan has signed 22 IMF programs since 1958 but hasn’t managed to finish any of them due to roughly 18 IMF waivers.

Pakistan and the financial world

The confidence gap between Pakistan and the financial world will get even wider if the ongoing initiative is unsuccessfully completed. In July 2019, Pakistan signed the current $6 billion Extended Fund Facility, which is valid for 36 months. The plan was extended by nine months until June 30, 2023, at the request of the then-finance minister, Miftah Ismail, and its budget was also raised to $6.5 billion.

The plan has been stalled at least four times in the past roughly four years, including twice while the current coalition administration was in office.

It has now been established that Miftah Ismail made a mistake by asking the IMF for an extension rather than negotiating a new program.

Due to disagreements over the ninth review, which also caused the completion of the 10th and 11th reviews to be postponed, the coalition government failed to timely complete the program reviews, and $2.6 billion is still waiting to be distributed.

As the rupee is currently trading in the region of Rs308 to Rs313 to the dollar on the open market, the lack of a convincing alternative plan from the government is causing concern in the markets.

Dar declared that the nation “will absolutely not default” and that there was no imminent financial crisis. He said that the nation had finished the ninth review’s technical requirements.

We have finished all previous actions, but it is unfortunate that the start of this review has been delayed by three months, he said. Prior to achieving a staff-level agreement, the IMF stated earlier this month that Pakistan needed to close a sizable financial deficit.

the finance minister

However, the finance minister has consistently stated that Pakistan has secured the cash and that the current account deficit is less than anticipated, which further reduces the funding requirement.

Dar bragged that he had surprised experts who were forecasting Pakistan’s default and that the country’s government had produced a current account surplus for two months in a row. He praised his economic team’s “efforts and hard work” and mentioned that the nation had generated a current account surplus in March and April of $750 million and $18 million, respectively.

However, the government’s strategy to choke off the economy and industry by restricting imports has been openly criticized by the markets and businesspeople and is just postponing the impending default. The finance minister emphasized that despite an “unfortunate” delay, he and his colleagues were making a sincere effort to finish the IMF’s ongoing initiative. He continued that the review ought to have been finished sooner.

To the business community, he “apologized” for the difficulties and inconveniences brought on by the current economic climate. But he made it clear that those difficulties were not the fault of the current economic team.

According to the minister

According to the minister, the nation has repaid commercial loans totaling $5.5 billion. China transferred $2 billion of those after it “understood” Pakistan had fulfilled the IMF‘s prerequisites for the release of the money.

Dar stated that with regard to the remaining $3.5 billion in loans from non-Chinese commercial banks, “we are expecting that a substantial part of this will be returned once the staff-level agreement is reached because it is always renewed and they (banks) are always there to do business.”

As of now, Pakistan has received guarantees from the United Arab Emirates, Saudi Arabia, and China that help will be provided in March and April to help make up some of the financing shortfalls.

According to the sources, the Ministry of Finance has encouraged the government to negotiate a new deal with the IMF due to a projected $25 billion foreign debt repayment, including the interest on loans, and the necessity to finance the current account deficit.