Islamabad: In an anticipated move, the Pakistan Tehreek-e-Insaf (PTI) led government on Monday announced to approach the International Monetary Fund (IMF) to avert a balance of payment crisis and possibility of facing default on repayment of external obligations.
Top officials of government confirmed to The News that the IMF would be formally requested for providing a bailout package in the range of $6 to $8 billion depending upon the ability of Islamabad to convince the Fund management and its board members to jack up quota by 5 to 7 times along with provision of front loading by getting at least $2 billion upfront and the first tranche probably within next 4 to 6 weeks period.
“After exhausting all options to seek funding from all avenues, including from friendly countries, PM Imran Khan approved making a formal request to the IMF for the provision of next bailout package from the IMF,” official sources said while talking to The News here on Monday night.
Before his departure for Bali, Indonesia, for attending the annual meeting of IMF/WB from Oct 8 to 14, Federal Minister for Finance Asad Umar announced the government’s decision for approaching the IMF for getting the 22nd programme of the Fund. However, some sources pointed out that Pakistan had to pay back around $6 billion to the IMF which the country had obtained during the last PML-N government, so the size of the programme might go up to $10 to $12 billion. “The size of the IMF programme will depend on the exact financing gap being faced by the country in the ongoing fiscal year as well as during the tenure of the programme,” said the official.
Pakistan might seek Extended Fund Facility (EFF) for 36-month programme and Islamabad will have to undertake hectic lobbying at important world capitals for increasing the size of the funding against the allocated quota of Pakistan into the IMF arrangement and then requesting the Washington based lender for frontloading of the programme.
“The provision of 10 million jobs and millions of housing units might become the victims as it will become difficult to pursue the projects under the tight noose of the IMF scrutiny,” said one independent economist and added that the IMF would pursue one shoe fit for all policy under which the sacrosanct targets of budget deficit and current account deficits would be curtailed by comprising growth and hiking inflationary pressures.
According to official announcement made by the Ministry of Finance on Monday stated that immediately upon assuming office, the present government had expressed serious concerns over the dire economic situation of the country and had committed to undertake a quick evaluation of all possible options. The government inherited 6.6 percent of fiscal deficit, more than a trillion rupees of unaccounted for losses in the energy sector and an unprecedented and debilitating current account deficit running at $2 billion a month.
To correct the underlying imbalances, fiscal and monetary actions needed to be undertaken without delay. In this regard, the Finance Supplementary (Amendment) Act, 2018 by the government and the policy rate increased by the State Bank of Pakistan are actions taken to stabilise the macroeconomic situation. In addition, regulatory duties on non-essential imports have had to be introduced to curb the unnecessary growth in imports.
After taking into account the current situation and consultation with the leading economists, the government has decided to approach the IMF for stabilisation and an economic recovery programme. It should be noted that the government has engaged with the friendly countries in the lead up to this decision and this engagement will continue.
There have been ten IMF programmes since 1990s in one shape or the other. It is essential to remember that there is a history of Pakistan repeatedly going to the IMF with every new government being forced to go with IMF programme due to legacy of those who held power in the previous government. The challenge for the current government is to ensure that fundamental economic structural reforms are carried out to ensure that this spiral of being in an IMF programme every few years is broken once and for all. In this regard the finance minister shall hold meetings with the top leadership of IMF during the annual meetings of World Bank/IMF at Bali later this week, the statement concluded.