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.