ISLAMABAD – Finance Minister Ishaq Dar clearly indicated on Thursday that the incumbent government would not take further measures to revive the stalled program of the International Monetary Fund (IMF), which is set to expire on June 30. Instead, the minister stated that negotiations for the next loan program would be the prerogative of the next government.
Addressing a press conference while unveiling the Economic Survey for the outgoing fiscal year 2022-23, Minister Dar expressed his belief that initiating talks for a new program at this stage would be undemocratic and unfair, considering the upcoming elections. He emphasized that the next government should have the opportunity to negotiate the terms of the loan program.
Despite the government’s efforts to revive the program by implementing unpopular decisions, it has been unable to convince the IMF to resume the program. Out of the total $6.5 billion bailout package, the IMF has disbursed $3.9 billion over the past four years, with the remaining amount contingent upon the completion of three pending reviews.
Minister Dar clarified that the existing program, whether completed or not, would expire on June 30, 2023. He expressed his hope that the 9th review would be completed, acknowledging the measures taken to revive the program, such as the withdrawal of subsidies on electricity, gas, and fuel.
In addition to the IMF’s reluctance, the incumbent government also appears less interested in reviving the program or initiating talks for a new one before the October 2023 elections.
Plan-B in Place:
Minister Dar revealed that a ‘plan B’ exists in case no deal is reached on the current review. He stated that Pakistan cannot afford to default and highlighted the country’s substantial assets compared to its external obligations of $100 billion. Dar cited the gas pipeline infrastructure alone, which amounts to $40-50 billion.
He attributed the liquidity crunch to the past government’s mismanagement of external account spending. The finance minister acknowledged that tax collection had suffered due to measures implemented to address import contraction and meet sovereign obligations. He mentioned that the revised tax target for the Federal Board of Revenue (FBR) would be shared in the upcoming federal budget 2023-2024.
Budget Figures Shared with IMF:
Responding to a query, Minister Dar confirmed that the coalition government had shared the budget numbers with the IMF to unlock the ninth review. He assured that there were no issues with the numbers and emphasized that the budget contained nothing objectionable.
Pakistan’s Economic Crisis:
Pakistan is currently grappling with an economic crisis, with inflation reaching a record high of 37.97% in May. To persuade the IMF to release funds, the government has implemented tax increases, raised energy tariffs, and reduced subsidies. The central bank has also raised the key policy rate to a record 21%.
The IMF has conducted eight out of the ten reviews scheduled during the Extended Fund Facility (EFF), with the last review taking place in August of the previous year.
With the upcoming change in government and the expiration of the current IMF program, the responsibility of negotiating a new loan program will rest with the incoming government. The decisions made in this regard will play a crucial role in shaping Pakistan’s economic future and addressing the challenges it faces.
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