File photo of State Minister for Finance Aisha Ghaus Pasha
The government on Thursday rejected reports of a ‘Plan B’ to tackle the prevailing economic crisis if it is unable to revive a suspended International Monetary Fund (IMF) program before it expires on June 30, stressing that it was committed to completing it.
Addressing the National Assembly’s Standing Committee on Finance and Revenue, Minister of State Aisha Ghaus Pasha said the government had expended significant political capital in implementing IMF commitments—reducing subsidies, increasing utility prices, imposing fresh taxes, adopting market-determined exchange rate—that the former Pakistan Tehreek-e-Insaf (PTI)-led government had reneged on and could not afford to abandon it.
Referring to a recent conversation between Prime Minister Shehbaz Sharif and the IMF’s managing director, she said both had agreed it was in “the interest of both sides” to complete the 9th review that has been pending since November. She also stressed that only by adopting difficult reforms could the country hope to join developed nations when it marks a century of its existence in 2047.
She said the IMF’s MD, during her talk with the prime minister, had asked Pakistan to arrange $6 billion in fresh loans to bridge a financing gap until the end of this fiscal year, on June 30. She said the Pakistani side had argued that this figure needed to be reduced to match lessened requirements arising from a lower current account deficit, austerity and import controls. She also explained that in prior negotiations, the IMF had asked Pakistan to secure an upfront commitment of half its external needs–$3 billion—to ink a staff-level agreement, but had raised new demands when authorities arranged $2 billion from Saudi Arabia and $1 billion from the U.A.E. Overall, she claimed, Pakistan had arranged around $4.5 billion in funding from various multilaterals, while also repaying $3 billion from Feb. 9 till now. However, she regretted, the lender had since demanded the full financing gap be filled.
Currently, said Pasha, the IMF mission was reviewing the government’s budget numbers, despite that being a requirement for the 10th and not the 9th review. “Nevertheless, we agreed to share budgetary numbers and we have already shared those things with the Fund,” she said, claiming the IMF’s harsher stance toward Pakistan was a result of the previous government’s reneging on commitments during its time in power. “Now the IMF managing director has asked us to share the budget details so that once prior actions are completed, the two sides could move towards a staff-level agreement,” she said.
To a question, the minister said the budget was broadly in line with IMF requirements and included structural reforms that should have been implemented far earlier. She hoped this would prove sufficient to convince the IMF to proceed toward a staff-level agreement.
During the briefing, members of the standing committee lamented the continuous absence of Finance Minister Ishaq Dar from its meetings and demanded he appear and personally briefs them. Criticism was also raised over the government not sharing the budget strategy paper, as this violates the Public Finance Management Act that requires it before April 15 annually. Pasha explained that while the budget strategy paper had been prepared, it had yet to accommodate the recommendations of eight separate committees formed by the prime minister in a bid to provide “relief” to the public. Regretting that these were “extraordinary circumstances,” she said the government was aiming to present a people-friendly budget that did not violate any IMF requirements.
Also on Thursday, local media reported that the government had decided to push for the completion of the 9th review and then not seek any extension for the IMF’s program that expires on June 30. Citing sources within the government, they said the new plan was to approach the IMF immediately after the next fiscal year began and seek a fresh program. However, they cautioned, this would likely be tougher than the existing program.