IMF chief hopeful of Pakistan avoiding default

Mehtab Haider
International Monetary Fund logo displayed at a wall in Washington, US, April 12, 2023. — Reuters
International Monetary Fund logo displayed at a wall in Washington, US, April 12, 2023. — Reuters

  • IMF chief says Fund securing confirmation from partners.
  • "Country requires policy framework to avert risks," she adds.
  • Pakistani authorities agree fuel scheme looked good on paper.

While Finance Minister Ishaq Dar has time and again assured the people that neither has Pakistan defaulted nor will it default in the future, International Monetary Fund's (IMF) Managing Director Kristalina Georgieva has also endorsed his views saying Pakistan had not reached the default level yet.

Georgieva, while addressing a news conference on the spring meeting of Breton Wood Institutions at the Washington-based Fund headquarters, said the Fund was securing confirmation from international partners to meet the financing gap requirements of Pakistan.

In response to a question regarding the looming default risk facing Pakistan, she said: “Pakistan had not yet reached that level and it would not but the country required a sustainable policy framework to avert such risks”.

She said the lender has been working very hard with the authorities in Pakistan within the context of the current programme to make sure the country has the policy framework in place to prevent reaching the point of unsustainable debt.

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

“My hope is that with the goodwill of everyone, and the implementation of what has been already agreed by the Pakistan authorities, we can complete our current programme successfully,” Georgieva maintained.

Islamabad is required to give an assurance that its balance of payments deficit is fully financed for the fiscal year ending in June to unlock the next tranche of IMF funding.

UAE deposit expected to be confirmed shortly

Dar attended the IMF-World Bank spring meetings via Zoom from Islamabad with the IMF Deputy Managing Director Antoinette Moniso Sayeh. During the meeting, the sources quoted Sayeh as saying that Pakistan was yet to meet its external financing gap of $6 billion out of which $3 billion would be needed to be financed before striking a staff-level agreement.

At this point, the sources revealed that State Bank of Pakistan (SBP) Jameel Ahmed, who is currently in Washington, told the participants that the UAE had shared the draft agreement for the provision of an additional $1 billion deposit in order to meet the requirement for signing the staff-level agreement.

A top official hoped that the UAE deposit was expected to be confirmed shortly. When quizzed about the timeline, he hoped that it might be done by next week.

Cross-fuel subsidy idea ‘good on paper’ 

Regarding the cross-fuel subsidy, the IMF was told that it was just an idea floated by a relevant ministry and it would be implemented only after an agreement on the salient features of the scheme.

The Pakistani authorities agreed with the IMF that the scheme looked good on paper but its transparent implementation would be really difficult.

According to a statement issued by the Ministry of Finance, Dar and Sayeh discussed the economic and financial policies and reforms and initiatives taken by the Government of Pakistan for the implementation of prior actions for the ongoing IMF programme.

Dar apprised her of the country’s economic outlook and shared with her the government’s initiatives for bringing economic stability leading to growth. 

He informed her that all prior actions for the ninth review under the Extended Fund Facility had already been completed and the Government of Pakistan was fully committed to fulfilling its obligations as agreed to with the IMF.

Sayeh appreciated the government’s policies and supported its initiatives in various sectors in terms of the implementation of prior actions agreed to with the IMF. 

She further extended her support to continue working together and showed confidence that the staff-level agreement would be signed very soon.