Federal Minister for Power Khurram Dastgir Khan has said that the failure to sign a staff-level agreement between the International Monetary Fund (IMF) and Pakistan could lead to the country’s increased reliance on China, which the US and other Western powers “must take into account”.
Dastgir made this statement while speaking on Dawn News show “Live with Adil Shahzeb” on Monday.
Pakistan signed a $6.5 billion agreement with the IMF in 2019, however, the release of $1.2 billion under the programme’s ninth review has been pending since October 2020 due to the government’s inability to meet certain conditions set by the lender.
Inflation surged to a record 36.4 per cent in April from a year earlier, driven mainly by skyrocketing food prices and rising energy costs.
The finance ministry projected that inflation would remain in the range of 36-38pc mainly due to the rupee’s depreciation and rising administered prices, which contributed to the increase in overall prices.
Meanwhile, Pakistan’s foreign exchange reserves are precariously low — at $4.46bn.
When questioned about the government’s approach to the budget in the event of a failure to reach a deal with the IMF, the minister said that the US and other Western powers should bear in mind that Pakistan’s dependence on China would intensify.
The minister also noted that there is a trend of gradually shifting international oil transactions from the US Dollar to other currencies, particularly the Chinese Yuan.
He stated that while Pakistan had met all technical requirements, there was still a possibility that the staff-level agreement might not be reached due to geopolitical factors, and he suggested that Finance Minister Ishaq Dar would be better suited to provide clarity on the matter.
He expressed his opinion that in the event the country is unable to complete the staff-level agreement, Pakistan will fulfil all of its financial commitments with the assistance of China or other friendly nations, and that the country will still strive to present the best possible budget given the circumstances, for the benefit of people.
When asked whether Pakistan is likely to default, as predicted by experts in Western countries, the minister responded by noting that these experts have been predicting Pakistan’s default for over a year.
However, he emphasised that Pakistan had not delayed a single payment, and after weathering difficult times, the country was slowly but surely moving towards financial stability, he added.