International Monetary Fund (IMF) Managing Director (MD) Kristalina Georgieva assured Prime Minister Shehbaz Sharif during a phone call on Friday that the global lender would continue to help Pakistan, according to a statement issued by the Prime Minister’s Office (PMO).
The phone call took place two days after the global lender’s executive board green-lit a $3 billion nine-month standby arrangement (SBA) for Pakistan in order “to support the authorities’ economic stabilisation programme”.
The board had approved the bailout package for the country for an amount of $2.25bn Special Drawing Rights (SDRs) — reserve funds that the institution credits to the accounts of its member nations, the IMF said in a statement, adding that this amounted to about $3bn, or 111 per cent of Pakistan’s quota.
Subsequently, Finance Minister Ishaq Dar said the first tranche of $1.2 billion was deposited in the central bank, while the “balance amount” of $1.8bn would be handed over after two reviews in November and February.
According to the PMO statement, PM Shehbaz held a phone call with the IMF MD today, during which she acknowledged that he had “built a very convincing case” for the board’s approval, adding that the IMF board had been “sceptical about Pakistan’s commitment to fulfilling the conditions of the agreement due to the past trust deficit”.
“[But] in the light of her (Georgieva) continued engagement with the prime minister, she assured the board that Pakistan will deliver on its commitments as she had personally met the prime minister and seen his seriousness to deliver,” the statement quoted her as saying.
“She acknowledged the leadership shown by the prime minister [and] underlined that there was a strong partnership and mutual trust between both the parties now.
“Terming Pakistan an important member of the IMF, she reassured to continue to help Pakistan,” the statement added.
For his part, the statement said, PM Shehbaz expressed gratitude to the IMF MD for her support and assistance in materialising the $3bn deal.
“The prime minister appreciated the MD for her leadership and professionalism. He also acknowledged that MD felt for the poor and termed her support invaluable.”
According to the statement, he also appreciated her for her “positive approach and frank comments” during his interaction with her in Paris last month.
“Eventually, the hard work on both sides paid off and Standby Arrangement was signed,” the statement quoted him as saying.
It added that PM Shehbaz told Georgieva that he “will not tolerate an iota of violation of this agreement”.
“This government is here till August after which an interim government will take over,” he said, adding that he was confident that they would continue to fulfil the obligations agreed under the new agreement.
And if his party was re-elected after elections, he was “committed to turning over the economy with the help of the IMF and development partners”, he assured the IMF MD.
According to the statement, he also told her that “it will be an honour [for him] to send a gift of Pakistani mangoes to the managing director as a token of respect and deep appreciation”.
‘New loan deal to anchor efforts to stabilise economy’
A day ago, the IMF had said Pakistan’s new $3bn loan programme would anchor the country’s immediate efforts to stabilise the economy and ensure that the current balance of payments need was fulfilled.
In a press briefing on Thursday, IMF spokesperson Julie Kozack said the SBA came at a “challenging juncture”.
The programme, she stated, was aimed at supporting the government’s economic stabilisation plan and policies, with due protection for the most vulnerable, and providing a framework for financing from multilateral and bilateral partners.
The spokesperson stressed that “steadfast policy implementation” was critical in the period ahead. “This will be critical for the success of the programme and, of course, ultimately, for aiding and supporting the people of Pakistan,” she added.
Kozack went on to say that programme, although short, would ensure that Pakistan’s current balance of payments need was fulfilled.
“While it is a relatively short programme, it provides time for Pakistan to implement policies critical to strengthening its domestic external economic situation, thereby supporting sustainability.
“Of course, resolving Pakistan’s structural challenges will likely require continued reforms over the medium term to underpin the needed economic transformations, to strengthen inclusive growth prospects, and to create an environment conducive to renewed private capital inflows,” she stated.
The spokesperson also assured that the IMF was always standing ready to work with the country and the government in efforts to restore sustainability and economic stability.
Another $5.6 bn in funding
Meanwhile, Pakistan is set to draw in $5.6 billion in additional financing, Bloomberg News reported.
The new funding will include $3.7 billion of commitments from bilateral partners including Saudi Arabia and the United Arab Emirates, said Nathan Porter, the IMF’s mission chief for Pakistan.
The IMF programme comes as a relief for the cash-starved nation and has strengthened the rupee and the stock market.
Earlier today, Dawn reported that the business community believed the approval of the nine-month arrangement would end a long-drawn-out period of economic uncertainty and volatility.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Irfan Iqbal Sheikh said securing the IMF programme was indispensable at this critical juncture of the country’s economic history.
He said despite being tough on trade and industry, the businessmen were welcoming the IMF bailout programme in the greater national interest as it would open up inflows of external funding from bilateral, multilateral and international institutional sources.
Meanwhile, Korangi Association of Trade and Industry President Faraz-ur-Rehman urged the government to seize this opportunity to implement concrete measures aimed at improving the economy and expanding the tax base.
He believed that the IMF programme would bring economic stability and enhance the fiscal capacity of the government.
However, Dawn’s editorial published today termed the SBA a “breather”.
“It gives us a few stable months to conduct the elections and service external debt over the next six months but doesn’t really change the fundamentals of the economy such as insufficient tax revenues, low exports, import-based consumption, and so on.
“However, it can help us get back on our feet if we use this ‘breather’ as a bridge to broad-based reforms for longer-term debt sustainability and growth. We’re in the deepest ever crisis of our own making and living on borrowed money and time,” it added.
Additional input from Reuters.