Caretaker finance minister hints Pakistan may seek another IMF loan

Pakistan’s caretaker finance minister Dr. Shamshad Akhtar has said that the country may need to continue borrowing from the International Monetary Fund (IMF) as its economy is still fragile.

The caretaker finance minister made this statement at a news briefing in Islamabad a day after Pakistan reached a staff-level agreement with the global lender on the first review of a $3 billion Standby Agreement (SBA), wherein the country will receive $700 million after approval from the lender’s Executive Board.

Dr Akhtar said that the current IMF program, approved in July to help Pakistan avoid defaulting on its external debt, will end in April 2024.

She said that the caretaker government, led by Prime Minister Anwaar-ul-Haq Kakar, will try to negotiate a new longer-term deal with the IMF to consolidate macro-economic stability.

As per reports Pakistan has about $1 billion in dollar-denominated debt due next year and the caretaker government is also seeking $6.3 billion in loans from the World Bank, Asian Development Bank, and Islamic Development Bank, and about $10 billion in bilateral funding from creditor nations.

These loans will help boost the country’s foreign reserves, which fell to $7.4 billion in the week ended November 10, equivalent to less than two months of imports.

The IMF said in a statement on Wednesday that Pakistan has made progress in implementing structural reforms and stabilizing the macroeconomic situation, but it also warned that the country faces significant external risks.

During the press briefing, the interim finance minister said that Pakistan’s dollar bonds and stocks have performed well this year, boosted by the IMF bailout deal in July. However, the government postponed a plan to raise funds from the global bond market as it would not get the best price.

She also said that the current IMF program, which was approved to help Pakistan avoid a default on its external debt, will end in April 2024 and the caretaker government will try to negotiate a new longer-term deal with the IMF to consolidate macroeconomic stability.

Dr Akhtar stressed that the country will have to go for more IMF loan programmes for some time as the economy remains fragile.

‘Gas price hike in January’

She outlined key aspects of the current IMF agreement, affirming the government’s commitment to regular tariff adjustments, including a planned gas price hike in January to prevent the accumulation of circular debt in both the gas and power sectors.

The electricity and gas rates would be “continuously revised” and their costs controlled besides transferring their management to the private sector as soon as possible and institutionalising ongoing campaign against power and gas theft, she said.

She said Pakistan would also need to adhere to the market-determined exchange rate completely, remain responsive through adequate monetary policy adjustment, particularly to core inflation, and bring four more state-owned enterprises in line with the financing and governance template of the newly approved SOE law.