WASHINGTON: The Inter­national Monetary Fund (IMF) has said that it would support the formulation of a new economic programme for Pakistan, if the new government requests.

But in a rare political aside, it also urged Islam­abad to resolve all electoral disputes peacefully.

“We look forward to engaging with the new government to complete the second review under the current Stand-by Arrangement and, should the government request, support the formulation of a new medium-term economic programme,” Reuters quoted an IMF spokesperson as saying in an email.

Wire reports also noted that while the IMF did not comment on domestic political developments, it did take the unusual step of encouraging the country’s new rulers to fairly and peacefully resolve all electoral disputes.

Pakistan plans to seek a new loan of at least $6 billion from the IMF to help the incoming government repay billions of dollars in debt due this year, according to officials.

“The focus, therefore, is currently on the completion of the current Stand-by program, which ends in April 2024. We look forward to working with the new government on policies to ensure macroeconomic stability,” the spokesperson added.

In an earlier press briefing, IMF Communications Director Julie Kozack noted that the Fund’s Executive Board had approved the first review of Pakistan’s Stand-by Arrangement (SBA) on January 11, with disbursements totaling approximately $1.9 million.

The SBA aims to stabilise the economy, particularly focusing on safeguarding vulnerable segments of the population.

Highlighting the caretaker government’s efforts, Ms Kozack praised its commitment to fiscal targets, the protection of social safety nets, and a tight monetary policy to control inflation.

She also acknowledged timely adjustments in tariffs to enhance the energy sector’s viability.

Responding to a question regarding political instability, Ms Kozack refrained from commenting on politics.

Instead, she reiterated the IMF’s commitment to collaborating with the new government, saying: “We look forward to working with the government to ensure stability, macroeconomic stability, for the good of the people of Pakistan.”

Last month, the party of incarcerated former prime minister Imran Khan had written to the IMF, asking that an audit of the disputed Feb 8 elections should carried out before any more bailout talks with Islamabad.

When asked to respond to the suggestion, Ms Kozack said the IMF does not comment on domestic political developments, but it “encourages the fair and peaceful resolution of all electoral disputes, given the importance of the institutional environment for economic stability and growth.”

Earlier this week, new PM Shehbaz Sharif had asked his government to open talks with the IMF for a new program after clearing its $3 billion stand-by arrangement.

Talks are expected to start in March or April, and member states, such as India, have already started stating their positions on the proposed package.

Rare political message

Murtaza Haider, a professor at Toronto Metropolitan University, told Dawn that the IMF does not directly comment on political processes in client states, but “its recent mention of the need for resolving electoral disputes in Pakistan suggests that the Fund is watching the political instability resulting from the widespread discontent with the election process and results”.

Prof Haider noted that the IMF might be sympathetic to Pakistan’s financial challenges, allowing the new government to align with IMF policies, but he warned that “this lenience should not be seen as full support, especially amid unresolved disputes from the February 8 elections.”

Nadeem Hussain, a Boston-based economic policy researcher and strategist, noted that the post-election pressure and its broad coverage in the global media “has created an environment that is not favorable for the economy.”

“The IMF has signaled its willingness to work with the newly formed government but also emphasized that the trust of the Pakistani people and confidence of the investor are critical for the country to come out of the current crisis.”

Uzair Younus, a senior fellow at the Atlantic Council, said “instability would, of course, concern the IMF, but those who were hoping for a tougher stance related to elections would be left disappointed with the organisation’s response.”

He pointed out that “the IMF just agreed to more than double Egypt’s program to $8 billion, despite the fact that Egypt is not a democratic country”.

Published in Dawn, March 9th, 2024

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