Sunday, May 28, 2023

Is Pakistan planning to negotiate IMF bailout extension?

The International Monetary Fund (IMF) logo is displayed outside its headquarters in Washington, DC, on October 8, 2022. — AFP
The International Monetary Fund (IMF) logo is displayed outside its headquarters in Washington, DC, on October 8, 2022. — AFP

Amid rising speculations regarding the completion of the International Monetary Fund (IMF) programme, the Ministry of Finance has clarified that its utmost priority is completing the ninth review — pending since November last year.

In response to a question sent by The News regarding the possibility of Pakistan requesting the Fund to extend the ongoing Extended Fund Facility (EFF) programme beyond June 30, 2023, the ministry said Islamabad desires immediate conclusion of the ninth review.

The written reply, quoting Finance Minister Ishaq Dar, said: “It’s premature to say anything. Ideally, we desire immediate conclusion of the 9th review and the start of 10/11th reviews now.”

Pakistan and the IMF have been discussing fiscal policy measures under the ninth review since late January, aiming to resume stalled funding of $1.1 billion due in November from a $6.5-billion programme agreed in 2019.

The country is deep in troubled economic waters and the only available lifeline, revival of the IMF $6.5 billion bailout, has become next to impossible.

The cash-strapped nation of more than 230 million people has a history of violating the terms and conditions laid forth by the lender of the last resort but the authorities in the past still somehow managed to convince the Fund.

However, this time the Pakistan Democratic Movement (PDM)-led coalition government is facing difficulties as the Washington-based lender is not showing any leniency.

Pakistan entered a 39-month, $6 billion IMF programme in 2019 which was extended till June 2023 and added another $1 billion in August last year when the board approved combined seventh and eighth tranche.

Islamabad is contemplating ways to meet other repayment deadlines as the country has about $3.7 billion in overseas debt due this month and in June against its current foreign exchange reserves of just $4.3 billion.

According to a Financial Times report, the cash-strapped nation is looking towards China to roll over more than $2 billion in debt due next month.

Two senior officials told the publication that Beijing had committed to help the country meet two crucial debt repayments in June worth $2.3 billion by providing fresh funds immediately after Pakistan makes the payments.

"The refinancing of the commercial loans worth $1.3 billion and a Chinese government loan of $1 billion would help Pakistan avert immediate default," the officials said.