Pakistan “engaged” with IMF for bailout package: Ministry of Finance

Pakistan has been negotiating a deal with the IMF since November last year to shore up the country’s dwindling foreign exchange reserves and avert the possibility of a balance-of-payments crisis. (Reuters/photo)
Updated 04 March 2019

Pakistan “engaged” with IMF for bailout package: Ministry of Finance

  • IMF program expected to be signed in April, says an EAC member
  • Pakistan’s urgency for IMF loan was somewhat reduced by $6 billion cash assistance from Saudi Arabia, UAE

ISLAMABAD: Pakistan’s Ministry of Finance said on Sunday that negotiations with the International Monetary Fund (IMF) for a bailout package have been in progress and the deal may mature in the coming week.

“We are still engaged with the IMF,” Saeed Javed, Media Director at the Finance Ministry, told Arab News without revealing further details.

Pakistan and the IMF will reach an agreement over a bailout soon, with a potential bailout size of about $12 billion, said FitchSolutions, a statistical rating organization headquartered in New York, in a statement issued last week.

However, Javed neither confirmed nor denied the report, saying “the volume of the loan from the IMF will become clear in the next few days.”

Pakistan has been negotiating a deal with the IMF since November last year to shore up the country’s dwindling foreign exchange reserves and avert the possibility of a balance-of-payments crisis. But the agreement is yet to be reached due to “tough economic conditions” the Fund may impose before it offers financial assistance.

“We expect to see a bailout package that focuses on fiscal consolidation, a review of monetary and exchange rate policy, financial reforms, and structural reforms, similar to measures implemented in the previous loan agreement,” the FitchSolutions said.

Hopes for the expected bailout package soared in the second week of February, when Prime Minister Imran Khan called on IMF Managing Director Christine Lagarde in Dubai and they both agreed to “work together” on policy priorities and reforms to fix the country’s fledgling economy. But Finance Minister Asad Umar has repeatedly said that Pakistan would sign the financial deal with the IMF only if it “gets the loan on favorable conditions.”

Dr. Ashfaque Hasan Khan, senior economist and a member of the Economic Advisory Council of the government, said the prime minister and his team have been looking for a “good deal,” thinking that this is the way forward to “steer the economy out of crisis.”

“I personally feel the deal with the IMF will be signed in April this year and it will be applicable from July,” he told Arab News.

This will be the country’s 13th loan program since the late 1980, though the government claims that this will be the last one to support the economy. Until now, Islamabad has managed to successfully complete only one IMF program – meaning that it received all the disbursements as planned – that ended in 2016.

Muzamil Aslam, senior economist and former CEO of EFG-Hermes Pakistan, said the government’s urgency for the IMF package was somewhat reduced by $6 billion direct cash assistance ($3 billion each) from Saudi Arabia and the United Arab Emirates and it had bought itself some “bargaining time” to deal with the Fund.

“If the government signs a financial package with the IMF by accepting all its terms and conditions, then Pakistan is likely to plunge deeper into the economic crisis instead of coming out of it,” he told Arab News.

Italy endorses China’s Belt and Road plan in first for a G7 nation

Updated 42 min 37 sec ago

Italy endorses China’s Belt and Road plan in first for a G7 nation

ROME: Italy endorsed China’s ambitious “Belt and Road” infrastructure plan on Saturday, becoming the first major Western power to back the initiative to help revive the struggling Italian economy.
Saturday’s signing ceremony was the highlight of a three-day trip to Italy by Chinese President Xi Jinping, with the two nations boosting their ties at a time when the United States is locked in a trade war with China.
The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies and critical transport hubs.
Deputy Prime Minister Luigi Di Maio played down such concerns, telling reporters that although Rome remained fully committed to its Western partners, it had to put Italy first when it came to commercial ties.
“This is a very important day for us, a day when Made-in-Italy has won, Italy has won and Italian companies have won,” said Di Maio, who signed the memorandum of understanding on behalf of the Italian government in a Renaissance villa.
Taking advantage of Xi’s visit, Italian firms inked deals with Chinese counterparts worth an initial 2.5 billion euros ($2.8 billion). Di Maio said these contracts had a potential, future value of 20 billion euros.
The Belt and Road Initiative (BRI) lies at the heart of China’s foreign policy strategy and was incorporated into the ruling Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.
The United States worries that it is designed to strengthen China’s military influence and could be used to spread technologies capable of spying on Western interests.
Italy’s populist government, anxious to lift the economy out of its third recession in a decade, dismissed calls from Washington to shun the BRI and gave Xi the sort of red-carpet welcome normally reserved for its closest allies.
Some EU leaders also cautioned Italy this week against rushing into the arms of China, with French President Emmanuel Macron saying on Friday that relations with Beijing must not be based primarily on trade.
There was not even universal backing for the BRI agreement within Italy’s ruling coalition, with Deputy Prime Minister Matteo Salvini, who heads the far-right League, warning against the risk of China “colonialising” Italian markets.
Salvini did not meet Xi and declined to attend a state dinner held in honor of the visiting leader on Friday.
Di Maio, who leads the 5-Star Movement, says Italy is merely playing catch up, pointing to the fact that it exports significantly less to China than either Germany or France.
Italy registered a trade deficit with China of 17.6 billion euros last year and Di Maio said the aim was to eliminate the deficit as soon as possible.
After talks with Italian Prime Minister Giuseppe Conte and Di Maio in the morning, Xi flew to the Sicilian city Palermo for a private visit on Saturday afternoon.
He is due to head to Monte Carlo on Sunday before finishing his brief tour of Europe in France, where he is due to hold talks with Macron and German Chancellor Angela Merkel.