The negotiations with Pakistani authorities to reach a deal that will allow the release of essential BAIL OUT funds for the Pakistani economy have remained fruitless, even on the final day of IMF delegations’ stay in Pakistan.
Pakistan and IMF fail to reach out an agreement
Pakistan’s finance secretary, though, seemed upbeat and predicted that a deal would soon be reached that would assist Pakistan in emerging from bankruptcy. Pakistan’s economy is struggling due to worldwide economic headwinds, as well as rising inflation and a shortage of raw supplies.
Pakistan Finance Secretary Hamid Sheikh stated,
“An agreement has already been struck with the IMF on prerequisite measures,”
Even as Pakistani finance ministry officials stated that some points about the deal still needed to be addressed , the IMF delegation after ten days of serious talks were packing their bags to fly out of the country.
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State of Pakistan
Pakistan today is facing challenges on multiple front and below some of the concerns which are impeding its growth:
- Political Chaos
- Deteriorating Security
- Balance of Payments crisis as it attempts to service high levels of external debt
As elections are looming large in Pakistan, it’s ruling elite has been pleading with friendly foreign countries to help them avoid the painful conditions demanded by IMF. Due to the lackadaisical approach of the Pakistani leadership, the latest instalment under an already agreed bailout has been stalled for months.
Pakistan has an hobson’s choice and the political consequences of agreeing to IMF terms for the bailout will prove disastrous for its ruling elites. Analysts have further warned that rejecting conditions and pushing Pakistan to the brink would have severe electoral consequences for Shehbaz Sharrif and his party, but so will agreeing to IMF measures which will increase the cost of living in the country.
State of Pakistan’s Foreign reserves
Even as Pakistan’s Central Bank released new data warning that its foreign exchange reserves had fallen by $170 million in a week and were now at a pitiful $2.9 billion, alarm bells are ringing in the country.
What IMF wants from Pakistan
- IMF wants Pakistan to boost its pitifully low tax base
- End Tax exemptions for the export sector
- Raise artificially low petrol, electricity and gas prices meant to help low income families
- IMF is also pushing Pakistan to keep sustainable amount of Dollars in the bank through guarantees of further support from friendly nations Saudi Arabia, China, UAE and World Bank
Further IMF is also not happy with Prime Minister Shehbaz Sharrif’s indecisiveness over unlocking the latest tranche of a draft $6.5 billion package which was agreed in 2019.
Pakistan Economy in freefall
With the exception of necessary food and medication, Pakistan is no longer granting letters of credit, resulting in a backlog of shipping containers at Karachi port filled with supplies the nation can no longer afford.
Shehbaz Sharrief’s dilemma
Elections in Pakistan will most probably be held in Mid-October, Sahrrief has been wary of ending popular market interventions to cushion cost of living for Paksitanis.
However recently Pakistan Government has relented and lossened controls on the rupees to rein n rampant black market in US dollars – a step that caused the currency to plunge to a record low – and hiked petrol prices by 16 percent.
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