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WASHINGTON: Officials of the International Monetary Fund are believed to have warned Pakistan that it may face serious economic crises if it does not take immediate corrective measures, IMF sources told Dawn.
Finance Minister Abdul Hafeez Shaikh and other members of his delegation held a series of meetings in Washington last week with IMF and US officials, trying to persuade them to show greater confidence in the Pakistani economy.
“And we did succeed in convincing them that we are moving towards economic stability,” said the finance minister who left Washington for home on Monday evening. “The growth rate going up to 4 per cent, $25.2 billion of exports, a record $13.5 billion of remittances are all signs of strength.”
While the IMF staff acknowledged that the economy was showing signs of improvement, they also warned against “impending crises emanating from higher commodity and oil prices, expansionary fiscal and monetary policies and the likely drop in external reserves,” an IMF source said.
There was also criticism of the government’s “unwillingness to move on the budget and energy policy in the next budget,” the source said.
Some IMF officials also expressed concern about the slow growth and the likely inability of the government to withstand another global economic slowdown, noting that a 4 per cent growth rate was not enough to pull the economy out of trouble.
“Responding to the dismal picture painted by the IMF staff on the sidelines of the formal meeting, the Pakistani delegation raised the prospect for a new programme to ‘refinance’ repayments to the fund,” the source said.
“There was no positive response from the IMF staff.”
The fund, however, has agreed to hold more discussions with Pakistani authorities on a possible refinancing.
In February, Pakistan started repaying a $7.6 billion loan it had received from the IMF under a standby arrangement signed in 2008.
The finance minister told a briefing in Washington that so far Pakistan had paid $600 million and by the end of the current fiscal year, it would pay a total of $1.2 billion.
Experts estimate that Pakistan will require $4.3 billion next year just to pay off the IMF debt.
While exploring the possibilities of refinancing Pakistan, IMF officials are believed to have reminded the delegation of the country’s “spotty record” in implementing the previous programme.
Experts in Washington noted that while negotiating new programmes with European countries, the fund demanded major adjustments and “a programme with Pakistan would be at least as hard -- or harder -- than the ones with the European countries”, the IMF source said.
The Pakistani team showed interest in a new arrangement with the IMF of about $3.5 billion to $5 billion for repayment of loans.Pakistan, however, had to opt out of a previous $11.3 billion standby arrangement with the IMF because of its inability to implement the reforms the fund had suggested.
And because Pakistan opted out, it did not get the two remaining tranches of $3.4 billion.
Under a repayment schedule agreed between Pakistan and IMF, Pakistan will repay $7.6 billion to the IMF by the end of fiscal year 2014-15.
