The International Monetary Fund (IMF) has rejected the Pakistani government’s claim that it has met all the conditions to receive funds under an agreed loan facility, according to a media report. The IMF signed a deal in 2019 to provide $6bn to Pakistan on condition certain requirements were met. However, the plan was derailed several times, and the full reimbursement is still pending due to insistence by the donor that Pakistan should complete all formalities. Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar have repeatedly claimed that Pakistan met all prior actions agreed for reaching a staff-level agreement, and there was no reason for holding back the agreement.
The Express Tribune newspaper reported that it got a statement from the fund on Friday, negating the claim made by the government with respect to meeting all prior actions necessary to complete the ninth review. “The IMF continues to work with the Pakistani authorities to bring the ninth review to a conclusion once the necessary financing is in place and the agreement is finalised,” the newspaper quoted Nathan Porter, the IMF Mission Chief to Pakistan, as saying.
Porter did not explain how much financing Pakistan needs to put in place to conclude the ninth review for the $1.2bn loan tranche that has been delayed for seven months now. The finance minister had said that Pakistan needed $6bn to bridge the financing gap by June this year. Saudi Arabia and the United Arab Emirates had assured Pakistan of providing $3bn, but there are no firm assurances for the rest of the loans.
Pakistan’s gross official foreign exchange reserves remain at $4.5bn. The country needs to pay nearly $4bn on account of principal and interest on debt till June this year. Since the government does not have a credible financing plan for the July-December period of the next fiscal year, Pakistan also needs to arrange funds to repay loans during the first half of the next fiscal year.
Even if China and Saudi Arabia roll over their short-term debts, Pakistan will still need over $4bn to repay international creditors during the first half of the next fiscal year. Porter has also mentioned the next fiscal year’s budget in his statement, which the government wants to present around June 10.
The Ministry of Finance seemed irritated by the IMF’s new demand. Senior finance ministry officials argued that the IMF should not link the approval of the ninth review with the next year’s budget. They said that the issue of the fiscal year 2023-24 budget should be taken up at the time of discussions for the 11th review. However, the IMF may not offer any major relief to Pakistan, which is already agitated by the government’s contradictory claims about the completion of the conditions.
