Govt scrambles for money as IMF talks reach final stages

Held up against the ropes both economically and politically, the federal government on Wednesday announced a slew of measures including an expected loan of $700 million from the China Development Bank (CDB) and austerity measures as it tries to ride out the threat of default. 

On a day marked by the chaos and excitement of the Jail Bharo Tehreek launched by the Pakistan Tehreek i Insaaf (PTI), finance minister Ishaq Dar in a presser said that the loan from the CDB had been approved and formalities completed. The loan is a vital if temporary injection to Pakistan’s scarily dwindling foreign exchange reserves, which the government is hoping will carry the country through until an agreement is reached with the International Monetary Fund (IMF)  

In a separate press conference, flanked by members of the PDM cabinet, Prime Minister Shehbaz Sharif said cabinet members would forgo their salaries and take other austerity measures like giving up their luxury vehicles. The prime minister claimed this would save Pakistan some Rs 200 billion. 

The current dire straits faced by the coalition government have followed from high-drama that saw the country’s negotiations with the IMF fall flat after a misguided effort by the PML-N’s financial wizard Ishaq Dar to peg the dollar at a set rate. 

The State Bank of Pakistan (SBP) is expected to receive the money from the CDB this week, which would help shore up the country’s dwindling foreign exchange reserves, Dar wrote on Twitter. This money will be crucial in maintaining enough import cover until a deal can be struck with the IMF. The fund’s deal is currently keeping a tranche of $1.3 billion away from Pakistan. While former finance minister Miftah Ismail has warned that Pakistan will have to enter another IMF programme immediately after completing this one, the more important aspect is that the IMF tranche is expected to unlock inflows from friendly countries and other multilateral institutions.

Dar had said earlier this year that the country’s foreign reserves situation would be “much better than you can think ” by end-June. China and Saudi Arabia would enhance their support, government-to-government (G2G) disinvestments would be completed, and the current account deficit would be about $3bn less than earlier projections, he had said.

Meanwhile, addressing a press conference alongside members of the federal cabinet in Islamabad, the premier said that ministers, state ministers and special advisers to the premier had “willingly” decided to forego their salaries and perks. He said that all ministers would now pay their own telephone, electricity, water and gas bills. 

“All luxury cars being used by cabinet members are being revoked and will be auctioned,” he said. “Where needed, ministers will be provided only one car for security.” The premier further said that federal ministers would also travel in economy when undertaking domestic travel or going abroad. He said that support staff would no longer be allowed to go on state visits while cabinet members would not stay in five-star hotels during foreign trips. He added that the current expenditure of ministries, departments and sub-departments would be reduced by 15 per cent.