Pakistan is still seeking the IMF loan to solve the balance of payment crisis. Even though finance Minister Asad Umar repeatedly saying that PTI government has solved this crisis. But no details so far provided that how the money was raised to repay the mature loans and interests. Despite the claims of government ministers, the matter of fact is that this crisis is not over yet. That is why the government is seems in a hurry to get the IMF package before January 15, 2019.
The government has not yet won concrete commitments from the United Arab Emirates while China has also not given any cash so far. The PTI government was hoping to get some dollars from China and UAE to ease the pressure on the foreign reserves. Both China and UAE might help the government in future with long term investments. But PTI government needs dollars in short term to fulfill the external financial obligations.
The government is trying to meet the conditions of the IMF and working behind the scene to get approval of this much needed loan. Both sides are talking to each other to finalise the details of the possible agreement. The first round of talks between both sides failed to reach on a consensus as IMF put forward hard conditions.
The IMF wanted to see further increase in the prices of electricity, rupee devaluation, meeting the tax collection targets and hike in interest rates. The government was reluctant to meet all the IMF demands in a short period of time. The talks failed to bring any positive result at that time. The government was confident to get economic package from China to boost the depleting foreign reserves.
Prime Minister Imran Khan himself hinted that the government might not go to IMF for bailout package. But now the government is seriously looking towards IMF to get the loan immediately. However, sources said Pakistan’s desire to get the loan approved by January 15 might not be fulfilled, as the Fund wanted Islamabad to adopt steeper measures before its case was sent for approval to the Executive Board of the IMF.
Finance Minister Asad Umar and IMF’s Washington-based mission chief Harald Finger made a direct contact for the first time since November 20. Both the sides discussed the developments that took place during three weeks.
The finance minister informed the IMF mission head about developments on exchange rate and monetary policy. The State Bank of Pakistan devalued the currency by Rs. 4 or 3.0 per cent to Rs. 137.7 to a dollar. It also increased the interest rates by 1.5 per cent to 10 per cent.
The sources said that the IMF welcomed both the decisions but urged Pakistan to continue these necessary actions to address the external sector imbalances. The IMF wanted further adjustments in the exchange rate and monetary policy, said the sources.
During the video conference link, both the sides also discussed the issue of increase in the electricity prices that remain unimplemented. The IMF was demanding 22 per cent further increase in electricity prices to address the issue of the circular debt. The PTI government already increased the electricity prices by Rs1.27 per unit but its notification had not been issued yet.
As of November 30, the foreign currency reserves held by the SBP were recorded at $7.5 billion, down $560.3 million in just one week. The central bank attributed the decrease to the external debt servicing and other official payments.
So, the PTI government has been left with no other option but make a deal with IMF to avert the balance of payment crisis. IMF is the only available option for the PTI government.
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17 November, 2019