IMF programme for Pakistan unlikely to be back on track soon

The International Monetary Fund(IMF) fund programme for cash-strapped Pakistan may not be back on tracks in a formal way very soon as the authorities in the country struggle with difficult political and economic conditions, a media report said on Friday.

The IMF Executive board approved a three-year, USD 6 billion loan package for Pakistan in July last year to rein in mounting debts and stave off a looming balance of payments crisis, in exchange for tough austerity measures, the Dawn newspaper reported.

However, the programme has been in limbo since January this year and a second quarterly review of the 39-month facility could not be completed. “The IMF fund programme for Pakistan may not be back on tracks in a formal way very soon as the authorities in the country struggle with difficult political and economic conditions,” the report said.

While the two sides are currently involved in setting timelines for revised structural benchmarks, the government wants some nascent feel-good factor in some economic indicators to take root before the IMF’s usually contractionary fiscal and monetary stances come into play, the report said.

Pakistan approached the IMF in August 2018 for a bailout package after Prime Minister Imran Khan’s government took over.

Despite loans from China, Saudi Arabia, and the UAE, Prime Minister Khan’s government was forced to turn to the IMF due to mounting economic problems amidst the Covid-19 pandemic.

In the same direction, according to informed sources, the government wants to extend the support package for construction to continue until June, instead of its expiry in December, as it is driving the industrial sector activities and growth in related areas while foreign exchange reserves and exchange rate are in comfortable position owing to better remittances.

Special Secretary and spokesperson of Finance Department Kamran Ali Afzal said consultations with the IMF were taking place on a daily basis, sometimes twice a day, on structural benchmarks and their timings.

He agreed that approval of two key bills relating to the National Electric Power Regulatory Authority (NEPRA) and the State Bank of Pakistan (SBP) would become “prior actions” and a way forward on power sector reforms and revenue generation would be necessary for “restoration of the programme in a formal way”.

His understanding was the two laws would become prior actions because these were not related to Covid-19, but power sector reforms and revenue side items could be readjusted as they were affected by the pandemic and remained key challenges.

He said slippage on structural benchmarks under the IMF programme had to become a prior action in subsequent review “unless waiver is given by the fund”.

Replying to a question, he said the formal review mission of the fund would be arranged once these advisory and consultative discussions took a clear direction.

Afzal said the second wave of the coronavirus had put the country in a difficult situation, otherwise things were moving in the right direction.

He said the revenue collection had grown by 4.7 per cent in four months and “concrete signs of recovery are emerging” like in the shape of improvement in large scale manufacturing and some crops but it was too early to believe that aggregate growth was also emerging.

Afzal said that not only the IMF but also other lenders like the World Bank and Asian Development Bank were supportive of the government in passing through difficult times and their engagements in advisory roles were positive.

He said the IMF had extended a USD 1.4 billion rapid financing instrument soon after Covid-19 broke out early this year, the World Bank advanced its loan programmes and so did the ADB and Asian Infrastructure Development Bank.