Cash – strapped Pakistan and the IMF on Thursday failed to reach a clear agreement to unlock crucial bailout funds on the last day of urgent talks in the country, local media said. However, Pakistan’s finance secretary appeared optimistic that a deal would soon be reached to stave of bankruptcy, amid soaring inflation and a storage of raw industry materials.
“An agreement has already been struck with the IMF on prerequisite measures,” Secretary of finance Hamed Sheikh said, according to private channel Geo news. The country’s state television channel quoted finance ministry officials as saying some points still need to be addressed.
The deadlock persists between Pakistan and International Monetary Fund as the two side have failed to reach. The staff – level agreement to unlock the USD 1.1 billion loan tranche after 10 days of “tough” talks, the news international reported.
IMF delegation in PAK
The international monetary fund delegation landed in Islamabad last week. To thrash out tough conditions that Prime minister Shehbaz Sharif called “beyond imagination”.
The IMF wants Pakistan to boost the pitifully low tax base, end tax exemption for the export sector, and raise artificially low petrol, electricity and gas prices meant to help low income families.
It is also pushing for Pakistan to keep a sustainable amount of US dollars in the bank through guarantees of further support from friendly nations Saudi Arabia, china and the UAE, as well as the world Bank.
The bailout Package
The USD 6.5 billion bailout package has been repeatedly stalled after former Pakistan Prime minister Imran Khan – led government. Reneged on subsidy agreements and failed on its tax collection commitments outlined in the deal.
Pakistan PM Shehbaz Sharif – led government resumed the programme and received around USD 1.17 billion in August.
Later, the programme stalled again in September at the time of the ninth review as the Pakistani authorities failed to live up to its commitments with the IMF and intiated some fiscal measures in contravention of the conditions agreed, as per the news report.
Later the Pakistan government agreed to IMF’s conditions as the foreign exchange reserves continued to reduce to dangerously low levels.
Reserves left with PAK?
On Thursday the central bank released fresh data warning it’s forex reserve had plunged $170 million in a week, standing at just $2.9 billion as of last Friday.
Analysts have warned that rejecting conditions and pushing Pakistan to the brink would have severe political consequences for the ruling parties, but so will agreeing to IMF measures rasing the cost of living.
The world’s fifth most populous nation is no longer issuing letters of credit, expect for essential food and machines, causing a backlog of shipping containers at Karanchi port stuffed with stock the country can no longer afford. Meanwhile industries warned the logjam of cargo would increasingly cause factories to shut, having a cascading effect on employment.
The government has earlier indicated that a deal was close, with Pakistan Energy Minister Khurram Dastgir Khan telling media “I have full hope that these talks will be concluded sucessfully”. In January annual inflation soared to over 27%, the highest it’s been in Pakistan since 1975, and there are mounting fears for the economy in a pivotal election year.
The latest installment under an already agreed IMF bailout has stalled fir months, with the government pleading with friendly nations to help them avoid the painful conditions demanded by the global leader with elections looming.