The International Monetary Fund (IMF) on Saturday said that it was still waiting for the “necessary financing assurances” for the successful conclusion of the review talks — dampening the expectations for a deal until Pakistan arranges the remaining $3 billion.
In an early morning statement, Nathan Porter, IMF Mission Chief to Pakistan, said that the IMF “looks forward to obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the 9th EFF (Extended Fund Facility) review”.
Highly-placed sources told The Express Tribune that the IMF was seeking confirmation for the total $6 billion loans that Pakistan urgently needs to bridge the external financing gap. They said that the government was trying hard to secure commitments for the rest of the $3 billion by next week.
Four days ago, Finance Minister Ishaq Dar had requested the IMF to show some flexibility and strike a staff-level deal which, according to him, can pave the way for arranging the rest of the loans. The IMF had identified the $6 billion hole in Pakistan’s external financing requirement that it asked to be bridged before the matter was taken to the IMF’s board for approval of the next loan tranche.
Pakistan may take some time to arrange the rest of the loans. The government has mentioned the loans from foreign commercial banks as one of the sources to bridge the gap.
But the finance ministry officials said that it will take four to six weeks in negotiations till a stage is reached for the foreign commercial loans to be disbursed. They added if the foreign commercial banks just give an assurance to the IMF, it will be sufficient to strike a deal.
However, the foreign banks are reluctant to extend any fresh financing due to the junk credit rating of Pakistan.
The government had also placed bets on the $450 million project proceeds from the Geneva pledges and expected to receive over half a billion dollars from the outsourcing of the three international airports — the two avenues that Pakistan may not tap immediately.
On Friday, Finance Minister Ishaq Dar had announced that the United Arab Emirates had given an assurance to the IMF for a $1 billion loan to Islamabad. Saudi Arabia had already made assurances for a $2 billion loan, according to Minister of State for Finance Dr Aisha Pasha.
A day earlier, the finance minister’s tweet suddenly raised hopes that the major obstacle to the completion of the 9th review had been crossed and the staff-level agreement would be signed soon. But Porter’s statement has dampened those expectations.
Nathan welcomed “the recent announcement of important financial support to Pakistan from key bilateral partners”, implicitly confirming the UAE and Saudi Arabian commitments. But the commitments are short of the requirements of Pakistan.
He further stated that the IMF was supporting Pakistan’s efforts to arrange the loans.
In order to bridge the financing gap, Dar had requested the World Bank and the Asian Infrastructure Investment Bank to provide $900 million loans. But Pakistan has not met all the conditions set by the World Bank. The Washington-based bank was also looking towards the IMF before approving any new budget support loan.
It appeared that the IMF still has certain issues with regard to Pakistan’s economic policies.
“During the meetings between the Pakistani delegation and IMF staff and management, there was agreement on the need to maintain strong policies and secure sufficient financing to support the authorities’ implementation efforts”, stated the mission chief.
The IMF had demanded an increase in the interest rates by at least 6% when the key policy rate was 17%. The central bank has already jacked up the rate to 21% during the last two months but it is still short of the IMF’s requirement of having the inflation-adjusted positive interest rates.
For the next fiscal year 2023-24, the IMF has projected 21.9% average headline inflation rate and the current real policy rate is still negative.
The sources said that the IMF had also shown concerns about inconsistent economic policies. The trust deficit had widened further after Prime Minister Shehbaz Sharif announced Rs50 per liter petrol subsidy for motorcyclists and small car owners of up to 800cc.