Pakistan economic crisis: Talks with IMF fail

In a major blow to the embattled nation, talks with the International Monetary Fund failed to yield desired results

SRINAGAR | Updated: 09 February, 2023 10:16 pm IST
There were reports of mishandling of the IMF team on a regular basis

Doors closing in on Pakistan as Finance minister Ishaq Dar’s attempt to woo the International Monetary Fund (IMF) failed.

Deadlock persists between the Pakistan finance ministry and IMF despite a closed-door meeting at PM House between FM Dar and IMF mission chief Nathan Porter to secure the Memorandum for Economic and Financial Policies (MEFP) from the latter.

Dar failed to convince the IMF mission chief on the two most critical issues raised by him. Porter sought the credibility of government assurances and the reliability of foreign loans committed by other nations that were perpetually delaying the handing over of the MEFP memorandum.

Despite the efforts of FM Dar, he couldn’t convince the IMF mission chief to hand over the MEFP memorandum.

The memorandum would have given the Pakistani government insights into the IMF’s response to the presentations submitted by the Pakistani authorities to the IMF over the last nine days.

There was a huge external financing gap of $4 billion that had to be bridged by China, Saudi Arabia and the United Arab Emirates (UAE) in the form of additional support by June, according to sources. The IMF had asked the government to take them on board while these nations were awaiting a positive response from the IMF.

So far, the Pakistani government has failed to submit any plan that could ensure that the $7 billion programme remains fully funded for debt repayments, money for financing the current account deficit and increasing the low foreign exchange reserves to a decent level, a source privy to the discussion said. There was a disagreement over the net international reserve target as well.

The IMF has decided to share the draft of MEFP only when complete clarity is achieved on the issues raised by the IMF mission chief by the Pakistani authorities, Pakistan Minister of State Dr Aisha Ghaus Pasha said in Islamabad.

“We are very near to finalising the negotiations,” she said, though the key policy document remains elusive for the Pakistani government on the penultimate day of the final negotiations.

According to sources, there could be some prior action that the IMF could set for calling its board meeting even if a staff-level agreement is reached before the team departs.

The other issue was the credibility of promises being made by Pakistan, as the IMF kept repeatedly citing the unfulfilled commitments similarly given in the past.

According to sources, a Pakistani negotiator said, “We are ready to commit to what the IMF is asking, but the IMF doesn’t trust our word.”

There were reports of mishandling of the IMF team on a regular basis with fresh disclosure that the Pakistan Minister of State for Petroleum kept the IMF mission chief waiting for over an hour during one of the meetings this week. The issue related to the gas and power sectors remains outstanding between the two.

Meanwhile, Pakistan Finance Minister Ishaq Dar remained confident that matters would be settled with the IMF and good news would prevail for the nation.

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