The development comes after the talks between visiting team of the IMF, which was in Pakistan for at least ten days and Finance Minister Ishaq Dar failed. The visiting team departed Islamabad last week.
The IMF has put forward tough and strict demands of reforms to Pakistan and has refused to show any flexibility on its position.
On the other hand, Pakistan has been trying to convince the IMF to reconsider the financial stretch that the country is going through, which has already resulted in a widespread inflation, coupled with climate change disaster of floods that sunk at least one-third of the country, causing major financial and structural damages to the country’s economy.
But despite the inconclusive negotiations between Pakistan and the IMF visiting delegations, both sides have agreed to continue the process of talks virtually, which would resume in the evening.
“Duration of the talks cannot be confirmed but we intend to wrap these up at the soonest,” said Hamed Yaqoob Sheikh, Finance Secretary.
The main focus of the talks from the start has been on reaching an agreement on a reforms agenda under the $6.5 billion bailout programme of the IMF for Pakistan’s Extended Funding Facility (EFF).
Pakistan entered into the IMF programme during 2019 when Imran Khan was the prime minister of the country. However, with Pakistan failing to meet the agreed terms and reforms of the IMF deal, it has had tough time convincing the IMF over its performance.
Currently, the ninth review of the IMF programme is pending approval by the IMF, after which it would release the tranche of $1.1 billion.
But with Pakistan’s credit rating falling and its international bonds slipping, and the country’s foreign reserves falling under $2.5 billion; the country is in desperate need of the release of the IMF tranche to not only strengthen its position in the international market, but also to see the release of over $30 billion worth of loans from other countries, which have linked their commitment to Pakistan with the revival of the IMF programme.
The financial markets in the country have responded aggressively to the news that a deal with the IMF was yet to be reached. The dollar-denominated 2025 bond saw the biggest declines as it fell by about 2 cents in the dollar before appreciating back by about 1.4 cents to trade at 48.1 cents.
Pakistan current foreign reserves stand at $2.9 billion, which are not enough to cover even three weeks of imports.
The current ruling government under premiership of Shehbaz Sharif is finding it really difficult to come to terms with the tough IMF demands. The ruling leadership blames former premier Imran Khan, who they ousted off power through a vote of no confidence in the parliament, for coming into a difficult deal with the IMF during 2019 and later violating its terms.
“The IMF agreement was done by Imran Khan. He agreed to all the tough conditions of the IMF but did not abide by them. And now, after violating the agreement multiple times; the IMF refuses to listen to us and trust us,” said Pakistan Interior Minister Rana Sanaullah.
Pakistan is in dire need of the IMF programme revival as it is left with no other option but to agree to the condition set forth by it.
Analyst say that the current government will have to suffer to its political standing by taking tough decisions, which would unlock another wave of inflation on the masses. And given the fact that 2023 is an election year for Pakistan, taking such decisions may not only severely damage the ruling government’s political contention to come back in power but will also benefit their political rival Imran Khan as he builds up on his anti-government narrative.
–IANS