Cash-strapped Due to a delay in signing the staff-level agreement with the international lender, Pakistan has decided to ask the US for assistance in order to obtain “lenient treatment” from the IMF. Pakistan is anticipating a much-needed tranche of cash from the International Monetary Fund, which has its headquarters in Washington (IMF). Islamabad has little choice but to turn to Washington and its allies in the west for assistance if it wants to persuade the global lender to grant it “lenient treatment” for advancing towards the staff-level agreement, according to Geo News.
The economic situation in Pakistan is severe.
A few weeks ago, the foreign exchange reserves reached the dangerously low amount of USD 2.9 billion. China, a longtime ally of Pakistan, is the only nation to have refinanced Islamabad with USD 700 million. According to the report, Ishaq Dar, the minister of finance, has made contact with the US diplomatic mission in Islamabad and has asked for assistance from the US treasury department to break the impasse.
“Without the blessing of Uncle Sam, things may not move in the desired direction, despite Pakistani authorities claiming that they had implemented all prior actions under the advice of the IMF, which were possible for them,” sources were quoted as saying by the report. “Now the IMF is asking to get 200 per cent assurances from the friendly countries and multilateral creditors to fill the financing gap of USD 6-7 billion on external account till the end of June 2023,” the report added.
The IMF has asked Pakistan to get confirmation on external financing needs of USD 6 to USD 7 billion from Saudi Arabia, United Arab Emirates (UAE), Qatar and multilateral creditors to fill the gap till the end of June 2023, it said. The Fund considers that without full surety of external financing, the ‘sustainability’ of the loan facility could not be guaranteed, said an official. Meanwhile, a senior government official said on Monday that the IMF side held a final meeting with the State Bank of Pakistan (SBP) officials on Monday, and now they hoped that the agreement would be signed in the next few days.
According to the official, the IMF also demanded abolishing the power sector subsidies on a permanent basis, as the Fund staff raised objections that the government had made commitments only till the end of the next financial year 2023-24. However, the IMF wanted a commitment to abolish power subsidies on a permanent basis; therefore, they asked for bringing changes in the wording of the Memorandum of Economic and Financial Policies (MEFP) in the last meeting, held in the previous week.
Pakistan is taking various steps on the Fund’s behest for the release of a USD 1.1 billion tranche under the USD 7 billion loan facility, including unveiling a mini-budget for fetching additional tax revenues of Rs170 billion by raising the GST rate from 17 per cent to 18 per cent. Pakistan and the IMF have been holding virtual talks after the two sides held 10 days of intensive negotiations with an IMF delegation in Islamabad from January 31 to February 9, which failed to reach an agreement.