Govt and IMF Engage in Blame Game over Delay in Program Revival

Pakistani authorities and the International Monetary Fund (IMF) are pointing fingers at each other regarding the delay in reviving the bailout program.

Official sources stated on Monday that both sides, the IMF and Pakistani authorities, were holding each other accountable for the “unjustifiable delay” in completing the outstanding ninth review and resuming the stalled program. It has been almost 80 days since the discussions in Islamabad on February 9.

Pakistan currently has less than a month’s worth of foreign exchange reserves and is awaiting a $1.1 billion bailout package from the IMF, which has been delayed since November due to issues related to fiscal policy adjustments.

These funds, which can only be released upon signing a staff-level agreement, are part of a $6.5 billion bailout package approved by the IMF in 2019. Analysts emphasize the criticality of this package for Pakistan to avoid defaulting on external payment obligations.

The country has yet to determine how it will fulfill the existing IMF program, which expires on June 30, 2023. Tomorrow (Wednesday), the IMF’s eleventh review under the Extended Fund Facility (EFF) program is due, while Islamabad is still struggling to complete the pending ninth review. Both sides have thus far been unable to reach a staff-level agreement to conclude the ninth review.

Although the tenth review was due on February 3 under the IMF program, it was not accomplished. Sources within the IMF mentioned to the publication that they are still awaiting confirmation of external financing requirements, despite Islamabad providing guarantees for an additional $3 billion in deposits from Saudi Arabia and the UAE. The IMF now seeks confirmation for the remaining $2 billion from the World Bank and $900 million from the Asian Infrastructure Investment Bank, while also exploring commercial loans from banks. The Washington-based lender is hesitant to finalize the deal without confirmation of an additional $2-3 billion.

On the other hand, Pakistani authorities argue that the IMF is engaging in political tactics, as the agreement should have been signed much earlier. “It’s nothing but a political game that is ongoing,” added the sources. Dr. Khaqan Najeeb, former advisor to the Ministry of Finance, expressed concerns about the difficulties in completing the tenth and eleventh reviews, scheduled for February 3 and May 3, respectively, and valued at over $1 billion.

He noted that delays in price adjustments, a credible plan for managing circular debt, filling the financing gap, petrol cross-subsidy, and payment of election expenses have repeatedly emerged to hinder the staff-level agreement. Dr. Najeeb added that these delays are occurring during a time of severe domestic economic crisis and a challenging global scenario, which exacerbate the situation for Pakistan.

“The IMF is the lender of last resort; probably it can move forward in that spirit. It is not a good option for Pakistan to remain near the brink of default,” he emphasized. He further stated that in the short term, funding from friendly countries, revival of the IMF program, clarity on program completion dates, and work on the 2023-24 budget are crucial steps that need to be taken.

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