Assurances to IMF

Published January 9, 2023

With the finance minister taking a back seat in recent days, it does not exactly inspire confidence that Prime Minister Shehbaz Sharif himself has had to step forward and extend assurances to the IMF regarding Pakistan’s intent with regard to resuming the Extended Fund Facility.

It is unclear whether Islamabad has finally realised the gravity of the crisis it is in, which is only going to get exponentially worse if Q Block’s assurances regarding forthcoming aid from friendly countries fail to materialise soon.

After PM Shehbaz recently spoke to the IMF managing director and “[…] told her about the government’s resolve to complete the terms of IMF’s programme,” a delegation from the lender has agreed to meet Finance Minister Ishaq Dar on the sidelines of the International Conference on Climate Resilient Pakistan, being hosted in Geneva on Jan 9 (today), to “discuss outstanding issues”.

The IMF programme had been brought back on track just a few months ago, and only after the previous finance minister convinced the cabinet to take several difficult decisions to re-order the country’s fiscal priorities. However, it stalled once again after Miftah Ismail was shown the door and replaced with the incumbent, Ishaq Dar.

Mr Dar proceeded to greatly complicate matters by making statements like: “I won’t take dictation from the IMF” and “I don’t care if they [IMF officials] come [for the 9th review]. I don’t have to plead before them.” The ninth review was subsequently delayed and, mere months later, the central bank’s foreign exchange reserves have depleted to just enough for less than a month’s worth of imports.

Islamabad is increasingly feeling the pressure as foreign debt repayments become due: industries that are dependent on imported inputs have been facing immense difficulties as banks either delay or refuse to issue letters of credit, leading to shortages of essential and even lifesaving items.

For the prime minister to personally step in after his finance minister has refused to budge for months on the action plan tabled by the IMF shows that the PML-N leadership remains divided on what its strategy should be. It is unlikely in such a situation that the IMF will take the prime minister’s assurances favourably, especially given the lender’s experience with Pakistan, where, on more than one occasion over the past twelve months, one person has made assurances to get the bailout programme back on track, but has then been replaced or undercut by another with completely different plans.

Resuming the IMF programme is certainly not all there is to Pakistan’s current economic troubles, but getting it back on track is key to unlocking other much-needed sources of financing. The PML-N must get its act together and decide who will be calling the shots. Its leadership’s indecision over which line of action to follow has already cost the government its credibility.

Published in Dawn, January 9th, 2023

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