KARACHI: Despite an uncertain political situation in Pakistan, finance ministry officials and the International Monetary Fund (IMF) have expressed their resolve to continue discussions for the completion of seventh review of the country’s $6 billion loan program.
The development comes as Pakistan’s opposition alliance seeks to oust Prime Minister Imran Khan and is gearing up to gather hundreds of thousands of people in Islamabad later this month. Opposition parties, including the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan People’s Party (PPP) of former prime ministers Nawaz Sharif and Benazir Bhutto, have submitted a resolution in the National Assembly, demanding a vote of no-confidence against PM Khan.
Historically, no Pakistani prime minister has ever completed his term in the office. Voting on the motion is expected by the end of this month, with political temperature going up with each passing day and amid talks between the IMF and Pakistani authorities for the completion of seventh review of the Extended Fund Facility (EFF) the South Asian nation secured in 2019 to shore up its economy.
“The authorities and the IMF will continue to discuss recent developments and other measures to promote macroeconomic stability in Pakistan,” Esther Perez Ruiz, the IMF’s resident representative for Pakistan, told Arab News on Thursday.
The IMF executive board approved $1 billion disbursement to Pakistan on February 2, after completing a sixth review of the country’s reforms under its $6 billion loan program secured in 2019.
The global lender revived the program after the government met its several conditions, including parliamentary backing to central bank’s full autonomy, uniform implementation of sales tax and energy tariff hikes.
Pakistan will receive about $1 billion under the EFF after the completion of the seventh review. The country has successfully completed six reviews and received a little over $3 billion from the IMF since 2019.
Pakistani officials are confident they will sail through the ongoing seventh review of the program, despite political uncertainty and deviation from the program’s objectives by announcing a $1.5 billion economic relief package that included subsidies on energy prices and a moratorium on increase in prices of petroleum products.
“Apparently, there should be no impact of the political situation on the talks with IMF because the program is already approved there is no option of discontinuing the program. Once approved, the governments have to honor the program,” Muzzamil Aslam, a spokesman for the Pakistani finance ministry, told Arab News on Friday.
“I don’t feel there would be any political repercussions unless there is a major objection and if they don’t agree with what we have done (announcement of relief package). And so far, no such things are in sight. We have given them our response and they have said that they will get back with their feedback.”
The finance ministry spokesman said the authorities had achieved all targets set for December 2021.
“The important things in the review are the targets whether you have accomplished the targets or not. We have accomplished all December 2021 targets,” Aslam said.
“We have made changes in the policy for which in principle there should be no objection though the IMF can say that it is not sustainable and suggest to drop it.”
IMF officials have expressed satisfaction over talks with Pakistani authorities, saying the South Asian country has achieved key objectives.
Ongoing discussions had been “constructive” in terms of ensuring Pakistan met its key objectives of “fiscal prudence, external sector viability, due protection of vulnerable groups from high international energy and food prices,” Reuters quoted IMF spokesman Gerry Rice as saying.
Pakistani analysts, however, say the completion of the seventh review may take longer than expected, mainly due to the political situation and the government’s deviation from the program through the relief package.
“The ongoing seventh review of the IMF program may take substantial time to complete,” Dr. Vaqar Ahmed, joint executive director at Sustainable Development Policy Institute (SDPI), told Arab News on Friday.
“The program may be delayed due to the current political situation and the government’s deviation from the promises made with the fund by cutting electricity tariff and freezing fuel prices, which was contrary to the program’s objectives,” Ahmed said. “The response from the IMF would be very critical which they have not released yet”.
Ahmed informed that two major long-term investors had postponed their Pakistan visit due to the political turmoil.
“High-profile investors from China and the United Arab Emirates have deferred their visits,” he said. “They are institutional investors and are waiting for the political dust to settle down because they want political stability.”
Khurram Schehzad, the CEO of Alpha Beta Core investment advisory firm, said: “In all of this political impasse, we are forgetting the economy, which is turning into a gigantic risk to handle, creating extreme uncertainty for investors and putting life of the poor at risk.”
The ongoing talks with the IMF and the political instability are also negatively impacting Pakistan’s currency, which is trading at an all-time low of Rs180.57 against the US dollar in the interbank market.
