The IMF saga continues to linger on as on Monday the international lender urged Pakistan to follow the Constitution in order to resolve its political disputes. This was said following PM Shehbaz Sharif’s conversation with Managing Director Kristalina Georgieva to revive the derailed $6.5 billion bailout package apparently in a last-ditch effort to avoid default. While the IMF traditionally does not comment on political matters, all of these domains are interconnected and it would be naïve to assume that all that is taking place will not have a spillover effect. As things stand, it appears that there is still a gap in expectations as the IMF and Islamabad are still not on the same page.
The discussion between PM Shehbaz and the IMF MD took place on Saturday after the finance ministry could not break the deadlock over the loan talks during the past four months. The comments regarding the political situation came two days later from Nathan Porter who is the IMF Mission Chief to Pakistan. In addition to this, Mr Porter highlighted that Pakistan is yet to reach an agreement with the IMF, which includes arranging foreign loans (there has been partial progress on this), approval of the new budget in line with the IMF framework, and restoration of foreign exchange market’s proper functioning.
Sources reveal that following his conversation, PM Shehbaz instructed the finance ministry to share details of the next budget with the IMF. However, Finance Minister Ishaq Dar has been criticizing the IMF again recently, pointing out that the lender continues to shift the goalpost and insinuated that there may be bias in play. Such statements do not help the situation, especially given the position that Islamabad finds itself in.
The fact of the matter is that time is not on our side as there remains only one month before the expiry of the programme. Further, Pakistan is not currently meeting the three conditions outlined by the IMF. The rupee was traded at Rs 285.41 in the interbank market on Monday but its value was around Rs 316 to a dollar in the open market. The new budget is also completely off track with a framework that the IMF had discussed, so this will also require adjustments which will be painful for the ruling government.
Perhaps the increasing instability and our reputation of not sticking through with tough reforms is pushing the IMF to seek further re-assurances. Whatever the reasoning may be, we are not in a position to negotiate and should do whatever it takes to unlock this tranche so that other partners and lenders are also given the green light to provide us with financing. Proudly claiming that we have escaped the threat of default is a sorry state of affairs. What we need is a structural reform that will pull us out of this perpetual cycle of dependency. The focus of the government currently seems to be on ensuring that the economy can survive on a ventilator, and that is not a feather the PDM coalition should want to have in its cap in the run-up to the general elections.