As the economic collapse nears for cash-strapped Pakistan, Prime Minister Shehbaz Sharif has accelerated his efforts to secure a bailout package from the International Monetary Fund (IMF). According to a senior official with the IMF, a deal could soon be reached on a much-needed $6 billion bailout package for the impoverished South Asian country. As per the Pakistani government, Sharif spoke with Kristalina Georgieva, the managing director of the IMF on Tuesday, where he pleaded for urgent disbursement of funds. This came nearly a week after the two met on the sidelines of a global finance meeting in Paris.
Later, the IMF’s mission chief to Islamabad suggested that the sides were close to reaching an agreement. Interestingly, discussions between Islamabad and the IMF stalled in December after the global lender delayed the release of a crucial tranche of $1.1 billion from the bailout. The deal was originally signed in 2019 by Sharif’s predecessor, Imran Khan.
Vulnerable Pakistan
The deal envisioned a deadline and if the IMF by Friday decides that Pakistan has not met the terms of the agreement, the fund could cancel the whole bailout package. Hours after Sharif spoke to the IMF head to revive the bailout, the global lender’s mission chief to Islamabad, Nathan Porter, in a much-awaited statement hinted that the sides were close to reaching an agreement. He said over the past few days, the Pakistani authorities had “taken decisive measures to bring policies more in line with the economic reform program supported by the International Monetary Fund” and it included “the passage of a budget by the parliament.”
Porter said the national budget that was approved by the parliament this week “broadens the tax base while opening up space for higher social and development spending, as well as steps towards improving the functioning of the foreign exchange market and tightening monetary policy to reduce inflationary and balance of payment pressures that affect particularly the more vulnerable.”
He said the IMF team was continuing discussions with Pakistani authorities with the aim of “quickly reaching an agreement on financial support from the IMF.” Porter’s remarks were the strongest signal since December that Pakistan could get the desperately needed $1.1 billion tranche before the bailout expires.
IMF is worried about Pakistan's unsatisfactory compliance with the bailout conditions
Pakistan and the IMF have been at odds over what the fund says is Islamabad’s unsatisfactory compliance with the bailout conditions. Pakistan claims it has fully complied with the conditions.
The cash-strapped Pakistani government is currently struggling to avoid a default with financial help from friendly countries such as China, Saudi Arabia and the United Arab Emirates. It has also been embroiled in an unprecedented economic crisis since Sharif replaced Khan, who was ousted in a no-confidence vote in the parliament last year.
Economic recovery has also been hindered by floods last summer that killed 1,739 people and caused $30 billion in damage. Pakistanis have been facing record-high monthly inflation since January. It has raised fears of anti-inflation protests, as the higher food costs and imposition of additional taxes have made Sharif’s government unpopular, although Sharif insists he inherited an ailing economy from his predecessor Khan, who is the country’s opposition leader.
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