Pakistan Economic Crisis: Pak PM Shehbaz Sharif faces IMF heat during loan restoration talks

Pakistan Economic Crisis: Pakistan Prime Minister Shehbaz Sharif on Friday said the International Monetary Fund (IMF) was giving a ‘tough time’ to the government during talks for the restoration of the loan. The IMF mission led by Nathan Porter began talks on January 31 with the Pakistan side headed by Finance Minister Ishaq Dar for the ninth review of the USD 7 billion assistance package.

The prime minister made his remarks while addressing an Apex Committee meeting in Peshawar. The committee is the highest provincial body to deal with militancy. While talking about the security situation, Sharif highlighted the economic challenges faced by the country and said that the “situation is in front of the entire nation”.

‘As I speak, the IMF delegation is in Islamabad and they are giving Finance Minister Ishaq Dar and his team a tough time,’ he said. The economic challenge at this point was unimaginable, Sharif said, adding that the IMF conditions that the country has to meet are ‘beyond imagination’, but it is mandatory to fulfill the demands of the fund.

He didn’t provide details about the talks with the IMF team that coincide with Pakistan’s reserves falling to a critically low level of USD 3.09 billion as of January 27 just enough to cover only 18 days’ worth of imports. The currency has also dropped massively against US dollars in the past few weeks. 

Pakistan’s central bank said on Friday that its foreign exchange reserves have dropped by 16.1 per cent to USD 3.09 billion at the end of the last fiscal week, the lowest in nearly 10 years. The IMF after a successful ninth review would provide over USD 1.1 billion and the gesture would open venues for bilateral loans from different friendly countries and multilateral institutions.

Meanwhile, the Dawn newspaper, quoting sources, reported that the IMF mission chief demanded clear action to bridge the daunting fiscal gap ‘ between 2 to 2.5 trillion rupees.

‘You don’t have any other option’ was the critical message, as members of the mission engaged with the finance and power ministries led by Ishaq Dar and Khurram Dastgir Khan, respectively, sources close to the meetings told the newspaper.

The two sides are expected to complete the technical-level talks in the first round, which will conclude by the end of the day, followed by the policy-level negotiations to complete by February 9.
Pakistan has agreed to increase petroleum prices and allowed a market base exchange rate but that seems too little and too late. The fund wants more measures to increase revenues.