IMF asks Pakistan to follow Constitution to resolve political disputes

ISLAMABAD: The International Monetary Fund (IMF) on Monday urged Pakistan to follow the Constitution in order to resolve its political disputes, as Prime Minister Shehbaz Sharif contacted Managing Director Kristalina Georgieva to revive the derailed USD 6.5 billion bailout package apparently in a last-ditch effort to avoid default, The Express Tribune reported.

The discussion between Shehbaz and Georgieva took place on Saturday after the finance ministry could not break the deadlock over the loan talks during the past four months, The Express Tribune wrote quoting sources.

Two days after the highest-level contact was established between Shehbaz and Georgieva, IMF Mission Chief to Pakistan Nathan Porter gave an unusual statement, expanding the IMF’s focus to the political arena.

“We take note of the recent political developments, and while we do not comment on domestic politics, we do hope that a peaceful way forward is found in line with the Constitution and rule of law,” he said.

The statement came amid the ongoing crackdown against the PTI workers, abductions of people, breach of the 90-day constitutional limit to hold elections in the two provinces and trial of civilians in military courts under the Army Act. Usually, the IMF does not comment on political matters, The Express Tribune reported.

In response to questions sent by The Express Tribune, Porter also spelled out the conditions that Pakistan has to meet to reach an agreement with the foreign lender. These include arranging foreign loans, approval of a new budget in line with the IMF framework, and restoration of the foreign exchange market’s proper functioning.

The sources said that the prime minister saw the IMF as the last resort to avoid a default and that was why he decided to intervene. After the conversation with the IMF chief, the prime minister instructed the finance ministry to share details of the next budget with the IMF, The Express Tribune reported.

The contact was made a day before Finance Minister Ishaq Dar criticised the global lender again on National Television.

“We are at a point where it would be extremely biased and shameful for them [IMF] if the 9th review doesn’t take place now,” Dar told a private TV channel.

A top finance ministry official confirmed to The Express Tribune that the prime minister had contacted the IMF managing director and requested her again to play a role in breaking the deadlock, The Express Tribune reported.

Earlier, the prime minister had telephoned Georgieva and sought her intervention to start review talks, which eventually took place in February.

Time is against the Pakistani side as only one month is left in the expiry of the programme, although Pakistani authorities still insist that the IMF can shorten the review completion period by calling a board meeting within two weeks from the date of announcement of the staff-level agreement, The Express Tribune reported.

“Sustaining strong policies and obtaining sufficient financing from partners remain key for Pakistan to maintain macroeconomic stability,” Porter stated.

He added that to this end, the IMF staff continues engagement with the Pakistani authorities to pave the way for a board meeting before the current programme expires in end-June.

“This engagement will focus on the restoration of foreign exchange proper market functioning, the passage of an FY24 budget consistent with programme goals, and adequate financing,” Porter added.

However, the sources said that Pakistan was currently not fulfilling all three conditions. The rupee was traded at PKR 285.41 in the interbank market on Monday but its value was around PKR 316 to a dollar in the open market, The Express Tribune reported.

The new budget is completely off track with the framework that the IMF had discussed, the sources said.

The IMF mission chief emphasized that strengthening domestic revenue mobilization and eliminating state-owned enterprises (SOE) losses to create fiscal space are also critical for ongoing sustainability, reducing inefficiencies that affect the private sector, and allowing a scaling up of social and development spending.

The USD 6.5 billion programme remains derailed since November last year and it is going to expire on June 30. Of the USD 6.5 billion, the IMF has not yet disbursed USD 2.6 billion, including the USD 1.2 billion tranche linked with the completion of the 9th review. Dar said on Sunday that “our understanding is that the IMF would complete the 9th review”.

Pakistan has only USD 4.1 billion in foreign exchange reserves, which are not sufficient to make USD 25 billion in repayments in the next fiscal year. In the absence of the IMF umbrella, other lenders are also not giving loans to Pakistan, The Express Tribune reported.

The sources said that there was still a difference of opinion on the issue of the current account deficit for this fiscal year, as the IMF has not yet accepted the government’s revised estimate of around USD 4 billion to USD 4.5 billion.