Not the first time: PTI plans to throw spanner in IMF talks

The PTI’s claims that the controversial results of the February 8th elections could end up affecting Pakistan’s negotiations with the International Monetary Fund (IMF) have materialised into a visible warning after the party’s incarcerated founder said he will write a letter to the fund over the alleged rigging.

But could such a letter have any real impact?

Beholden to the fund

It is worth mentioning that Pakistan is currently entirely beholden to the IMF to complete its debt repayments. The current situation is an amalgamation of policies and decision making that transcends different governments of different political parties in Pakistan. 

Pakistan is currently party to a ‘Stand-By-Agreement’ that the IMF signed with the PDM government back in June 2023. The SBA worth over $3 billion had been signed after Pakistan and the IMF failed to successfully conclude a programme that had been marred first by the imposition of a petrol subsidy by Imran Khan’s government, and later by the bull-headed negotiation tactics of PDM’s finance minister Ishaq Dar.

The SBA had been signed as a sort of bridging agreement that would see Pakistan through its election period so that whoever came to power could then start negotiations anew with the fund. Two tranches of that $3 billion agreement have been made already. But now the fund is insisting that even the third tranche of the SBA will be negotiated by the new government.

With Shehbaz Sharif’s bid for the PM house all but a certainty, the fund would perhaps have felt comfortable negotiating with the same prime minister that they last left off with. 

Not a new threat

However, Imran Khan’s decision to write a letter to the IMF might cause some complications. The fund craves consistency from its partner countries as a general rule. One of the reasons Pakistan came so close to default during the PDM’s first government was the replacement of Miftah Ismail by Ishaq Dar at the helm of the finance ministry. 

“Ther IMF, European Union, and other organisations have their charter that says these organisations will work in a country where there is good governance. For good governance, a country needs to have democracy that requires free and fair elections,” Ali Zafar said while speaking to the media outside Adiala Jail.

This is not the first time that the PTI has tried to use the necessity of the IMF programme to its advantage. Back in August 2023 when the PTI had been ousted from government through a vote of no confidence, audio conversations between the PTI’s finance minister Shaukat Tarin and his provincial counterparts in Punjab and KP, Mohsin Leghari and Taimur Jhagra, came to light in which he was instructing them to help derail negotiations with the fund. 

Two audio clips surfaced via TV channels and social media; in one, the man said to be Tarin can be heard guiding Punjab Finance Minister Mohsin Leghari to tell the federal government and the IMF that he would not be able to commit to a provincial budget surplus in light of the recent floods that have wreaked havoc in Pakistan.

In the other audio, Tarin can be heard asking Jhagra whether he had drawn up a similar letter. “[The IMF commitment] is a blackmailing tactic and no one will release money anyway. I won’t release them, I don’t know about Leghari,” says the man, alleged to be Jhagra. Tarin says the letter, once drafted, would also be sent to the IMF representative so “these b******* know that the money they were forcing us into giving will be kept by us”.

The IMF tactic seems to have been adopted once again. Even before Imran Khan’s recent announcement, the PTI’s current chairman, Gohar Ali Khan, claimed on the 20th of February that if election results are not released under Form-45s, it could impact Pakistan’s prospects of the International Monetary Fund (IMF) programme.

Unlikely to have an impact

While the letter is an inconvenience, the IMF is unlikely to heed its advice. As an international body the fund is not in a position to determine election results. As such, the letter from a former prime minister might not carry much weight. 

However, it is worth mentioning that Pakistan is going to face a tough negotiation with the fund as it is because of the delicately balanced political situation and a weakened coalition government coming into power. Back on the 19th of February, global rating agency Fitch warned that the “close outcome” of the February 8 polls and the resulting “near-term political uncertainty” may complicate Pakistan’s efforts to secure a financing agreement with the International Monetary Fund (IMF). The US-based Fitch Ratings — one of three leading global rating agencies — said a new IMF deal, to succeed the Stand-By Arrangement (SBA) expiring in March 2024, was key to Pakistan’s credit profile. “[…] We assume one will be reached within a few months, but an extended negotiation or failure to secure it would increase external liquidity stress and raise the probability of default,” it said.