After the ‘go ahead’ from the US Secretary of State Mike Pompeo, an International Monitory Fund (IMF) team is scheduled to visit Pakistan on September 27 with a bailout package of $7.5 billion.
Sources told Pakistan Today that the expected team was coming with a complete program of extended funds to Pakistan which would comprise the second part of the Extended Fund Facility (EFF) arrangement. Although Pakistan wanted to have a double-digit program, the IMF has agreed to extend only $7.5 billion out of a quota of around $13 billion for Pakistan. The Fund had already contracted a $6.4 billion bailout program in 2013 which completed in 2016.
The previous one was Pakistan’s only fund program, out of 11, to have reached completion since it started receiving IMF bailouts in 1988. Pakistan had declined the last two tranches of another program under the Musharraf-Shaukat Aziz tenure while the rest of the nine programs ended in failures.
“The team is not coming only for consultation… the homework has already been done by both the IMF and Pakistan. Keeping in view the financial position of the country, both sides were ready for such arrangements,” said an insider at the ministry of finance.
“The extended program will accompany stiff conditions of introducing institutional reforms and taking some unpopular decisions on the part of the government. The conditions may include a range of reforms such as the central bank’s independence, exchange rate flexibility, and an aggressive push to privatise public sector enterprises (PSEs) etc. apart from the increase in utility charges” said the sources.
With projected external financing requirements of $31 billion in the current financial year, Pakistan was expecting an IMF program by the last week of September 2018.
Though in the newly reconstituted and much scrutinised Economic Advisory Council (EAC), the government has pinned its hope on alternative options available in its kitty, however, none of the members had ruled out the next IMF program.
Keeping in view the sheer external financial gap, the PTI government was hoping to bridge the gap by taking some extraordinary measures. Some of these radical and out of the box/steps included a year-long ban on imports for cheese, cars, mobile phones and fruit that could save some $4-5 billion.
Pakistan faces a huge battle on the external front. The ever-shrinking foreign exchange reserves hover around $10 billion which scarcely covers the two-month import bill.
As per sources, the IMF team was visiting Pakistan after the green signal from the US. Information Minister Fawad Chaudhry on Wednesday made it clear that the US Secretary of State Mike Pompeo has assured Pakistan during his visit last week that Washington would not try to block any request for a bailout from IMF. Pompeo had earlier shown his country’s reservation about the IMF giving money to Pakistan due to concerns Islamabad would use the cash to pay off Chinese loans.