Pakistan, IMF agree to continue deliberations over bailout program

Special Pakistan, IMF agree to continue deliberations over bailout program
Pakistan's Prime Minister Imran Khan speaks during the World Government Summit in Dubai, United Arab Emirates, on Sunday, Feb. 10, 2019. (AP)
Updated 10 February 2019

Pakistan, IMF agree to continue deliberations over bailout program

Pakistan, IMF agree to continue deliberations over bailout program
  • Christine Lagarde says IMF stands ready to support Pakistan
  • Saudi Arabia, UAE’s financial assistance made Pakistan comfortable to deal with the Fund

ISLAMABAD: Prime Minister Imran Khan and Managing Director of the International Monetary Fund (IMF) Christine Lagarde agreed in a meeting on the sidelines of World Government Summit in Dubai on Sunday to continue talks for a bailout package.

“The two sides agreed to work together on policy priorities and reforms aimed at reducing imbalances and laying the foundations of a job creating growth path in Pakistan,” Dr. Khaqan Hassan Najeeb, Spokesperson for the Ministry of Finance, told Arab News shortly after the meeting.

He said the deal on the IMF support package was yet to be reached and “deliberations between the Pakistani authorities and IMF staff will continue to finalize an agreement on the contours of a program.”

Pakistan government 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” suggested by the Fund before it offers financial assistance.

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.”

In the meeting with the IMF chief, Prime Minister Khan vowed to undertake “structural and governance reforms and strengthen social protection in the country.”

Meanwhile, a press release issued by the IMF said that Lagarde had a “good and constructive meeting with Prime Minister Imran Khan.”

“We discussed recent economic developments and prospects for Pakistan in the context of ongoing discussions toward an IMF-supported program,” Lagarde was quoted as saying in the statement.

“I reiterated that the IMF stands ready to support Pakistan,” she said, adding that “decisive policies and a strong package of economic reforms” would enable Pakistan to restore the resilience of its economy and lay the foundations for stronger and more inclusive growth.

Citing the PTI government’s policy agenda, Lagarde said protecting the poor and strengthening governance were “key priorities to improve people’s living standards in a sustainable manner.”

On the other hand, senior economist Dr. Ayub Mehr said that “the highest-level meeting” between Prime Minister Khan and IMF chief showed that work on “operations level” of the financial agreement had been completed.

“Pakistan is in a dire need for a financial package from the IMF to overcome its liquidity crisis and bring a financial discipline to improve its economy,” he told Arab News. “And we have already met most of the IMF conditions like rupee devaluation to get the package,” he added.

Pakistan was faced with a financial deficit of around $12 billion when the PTI government took charge of the office in August last year, but the situation has changed now, Dr. Athar Ahmed, senior economist, said.

“The government is now in a comfortable position after the availability of $6 billion direct cash assistance ($3 billion each) from Saudi Arabia and the UAE, and is now trying to negotiate a better deal with the Fund,” he told Arab News.

“We are definitely going to get a financial package from the Fund, but on conditions that would not harm our economic growth and burden the poor through sharp hike in electricity and gas tariffs,” he added.