IMF puts damper on loan deal, sets new condition for Pakistan

The revival of the IMF loan program for Pakistan has taken a new turn, as the international lender has put forward a new condition before signing a staff-level agreement.

After allegedly fulfilling all prior conditions to unlock the next tranche of a billion dollars, Pakistan is faced with another obstacle.

SAMAA TV sources claimed that the IMF has sought a written assurance of financing from friendly countries, including the Kingdom of Saudi Arabia, Qatar and the United Arab Emirates (UAE) by June 30.

Also Read: Pakistan may seek US help for concluding deal with IMF

Finance Ministry officials said the written assurance must be provided by the executive directors of the respective friendly countries at the International Monetary Fund.

The Finance Ministry along with the Prime Minister Office has become active in obtaining the written assurance from the friendly countries.

The authorities expect to obtain the written assurance soon, the sources said.

Pakistan has completed the implementation of all preconditions set by the IMF, including implosion of Finance Bill 2023 or mini-budget and increasing electricity and gas tariffs.

The Finance Ministry said Pakistan had also agreed with the IMF’s last condition not to take direct loans from commercial banks.

Pakistan and IMF officials have completed negotiations on the revised Memorandum of Economic and Financial Policies.

Sources say Pakistan hopes to seek a staff-level agreement approval from the IMF executive board.

Shehbaz, Dar assure IMF deal ‘soon’

Prime Minister Shehbaz Sharif said Pakistan has fulfilled the toughest of IMF conditions, which resulted in burdening the masses.

He also forewarned that there will be more burden on “hardworking Pakistanis” in the days to come in the wake of these conditions.

“I absolutely acknowledge this,” the prime minister had said in an interview to a private TV channel, about the tough days ahead, adding Pakistan will sign the staff-level agreement within a few days.

Also Read: IMF wants Islamabad to immediately remove restrictions on imports

The premier said when he came to power, he and his coalition partners were aware of the economic situation of the country, as it was on the brink of a default.

Fallout on currency

Amid a standoff on an agreement between the IMF and Pakistan, the American currency gained 85 pasias to reach Rs282.85 against the rupee at the closing time of interbank trading on Wednesday.

Dar, Miftah policies

The IMF review dates back to August 2022 and was signed by the then finance minister Miftah Ismail, and the then acting governor of the State Bank of Pakistan, Murtaza Syed.

Also Read: Talks with IMF to resume on Monday on loan program

Pakistan had also slashed all subsidies that were untargeted, including electricity subsidy to exporters; and removed the cap on the US dollar with a market-based exchange rate to meet IMF conditions.

Ishaq Dar then assumed charge as the finance minister at the end of September 2022, and on October 6 announced the resumption of the electricity subsidy to exporters.

Fate of farmers package

The federal government announced a Kissan Package at the end of October last year that offered cheaper inputs and credit to farmers without clear policy.

In February this year, the government slashed the subsidy on electricity for the export sector as well as farmers will end from March, while a subsidy of Rs12.13 per unit on electricity will be returned to the export sector.