ISLAMABAD: The International Monetary Fund (IMF) wants external financing commitments fulfilled from friendly countries before it releases bailout funds, Pakistan’s Prime Minister Shehbaz Sharif said on Tuesday.
The lender has been negotiating with Islamabad since early February to resume $1.1 billion in funding held since November last year.
The IMF funding is critical for Pakistan to unlock other external financing avenues to avert a default on its obligations. Its diminished central bank reserves barely cover four weeks of imports.
“Now we are being told that the commitments from friendly countries be fulfilled and God willing we will,” Sharif told parliament in a live telecast speech.
An IMF statement said substantial progress had been made in discussions towards policies in recent days and financial assurances were standard in IMF programmes.
“All IMF programme reviews require firm and credible assurances that there is sufficient financing to ensure that the borrowing member’s balance of payments is fully financed in the next 12 months, with good prospects for financing over the remainder of the program. Pakistan is no exception,” the statement to Reuters said.
Several friendly countries including Saudi Arabia, China and the UAE, have made commitments to help Pakistan fund its balance of payments.
An agreement would be signed once a few remaining points, including a proposed fuel pricing scheme, are settled, an IMF official said on Friday.
Earlier, Sharif had announced the government’s plan to charge affluent consumers more for fuel in order to subsidise prices for the poor, who have been hard-hit by inflation. In February it was the highest in 50 years.
The IMF’s resident representative in Pakistan, Esther Perez Ruiz, said the government had not consulted the fund about the scheme.
The lender wants Islamabad to explain the fuel scheme before any loan deal.
“Fund staff are seeking greater details on the fuel subsidy scheme in terms of its operation, cost, targeting, protections against fraud and abuse, and offsetting measures, and will carefully discuss these elements with the authorities,” the IMF said.
The IMF signalled it preferred boosting social support through the country’s large government poverty alleviation Ehsaas Kafalat program.
“As a general matter, the IMF sees strengthening support to those eligible for social assistance through the unconditional Kafalat cash transfer scheme as the most direct way to help the neediest in Pakistan,” the statement said.
Published in Dawn, March 29th, 2023