ISLAMABAD: A senior leader in Pakistani Prime Minister Imran Khan’s administration said on Friday the government’s policy of seeking loans from allies and multilateral lending agencies was unsustainable and “cogent” economic reforms were needed instead, less than a week after the government signed a $6 billion bailout package with the International Monetary Fund last week.
On Sunday, Pakistan reached an accord with the IMF for a three-year rescue program aimed at shoring up fragile public finances and strengthening a slowing economy.
Opposition parties have since said they want to debate the agreement in parliament and local media reports have widely quoted ruling party lawmakers as saying off the record that they were unhappy with the deal, which has thrown the Pakistani rupee in freefall and led to the stock market shedding over 800 points.
“Pakistan cannot rely on the friendly countries [for financial support] and IMF loans forever, we have to build our country ourselves by introducing cogent economic reforms,” Zubaida Jalal, Federal Minister for Defence Production, told Arab News on Friday.
The IMF has an unhappy history with Pakistanis, many of whom see the package negatively. In the past, the government has failed to meet the terms of a previous package in 2008, and the country is still struggling to repay billions of dollars of debt from that and a subsequent package signed in 2013.
Jalal said the prime minister’s advisor on finance Dr Abdul Hafeez Shaikh had taken lawmakers of the ruling Pakistan Tehreek-e-Insaf and allied parties of the government into confidence over the IMF deal on Monday.
“There were some dissenting voices as well over the IMF loan deal [during the briefing], but all of us gave approval for it,” she said. “The IMF loan seemed to be an unavoidable option at the moment [due to the economic crisis].”
The minister said the federal cabinet had not discussed the IMF loan deal separately as “almost all of the cabinet members were present on Monday during the briefing arranged at the Prime Minister’s secretariat.” “We may be briefed about it in the next cabinet meeting, if need be,” Jalal said.
On Friday, the Pakistani rupee closed at 151 against the dollar in the open market as compared to Thursday’s close of 147, Exchange Companies Association of Pakistan data said. The stock market also shed 804 points closing at its lowest in 17 years.
“The economic situation at the moment is tough for the country and seems like this will continue for another year or so, the nation will have to bear it for some time,” Jalal said.
In a press statement released after the staff-level IMF deal was announced Sunday -- it still requires approval from the Fund’s board in Washington -- the IMF said a “market-determined” exchange rate would help the financial sector, implying less control from Pakistan’s central bank which presently artificially regulates rupee prices in a managed float system. Other conditions attached to the deal could seek a spike in the policy rate and a 15 percent hike in the power tariff.
Pakistan’s major opposition parties, including the Pakistan Muslim League-Nawaz and Pakistan Peoples Party, have criticized the government for keeping the IMF deal a “secret” and not putting it before parliament for debate.
“The loan agreement has unleashed a wave of inflation and unemployment in the country, and still the government is defending it, and not ready to take the parliament into confidence on conditions of the Fund,” PMLN Senator Mushahidullah Khan said.
The Muttahida Qaumi Movement-Pakistan (MQM-P), a coalition partner of the government, also expressed concerns about a ballooning economic crisis following the IMF deal.
“We are allies of the government and support it, but it must initiate measures to arrest rising inflation,” Iqbal Muhammad Ali Khan, a senior MQM-P lawmaker, told Arab News.
Jalal said the IMF deal had nothing to do with the fast devaluation of the rupee against the US dollar as the State Bank of Pakistan was “solely responsible to manage the currency exchange rate.”
At least on paper, Pakistan’s central bank is an autonomous body mandated to regulate the country’s monetary and credit system, but successive governments have been accused of interfering with state bank policies.
Earlier this month, following a major reshuffle of the federal cabinet, the central bank governor was sacked and replaced by a veteran IMF economist during then ongoing negotiations for Pakistan’s 13th bailout package.
The IMF loan, which referred to its three-year accord as an “ambitious structural reform agenda” for Pakistan, comes after massive financial support from Saudi Arabia and the UAE last year to stave off a balance of payments crisis and boost dwindling foreign exchange reserves.