ISLAMABAD: Pakistan’s next government wants to renegotiate a stalled $6 billion bailout package with the International Monetary Fund (IMF) to stabilize the economy and stave off a looming balance-of-payments crisis, said a former finance minister who is privy to the plans of the upcoming administration on Sunday.
The IMF put the loan program on hold amid weeks of political turmoil and economic uncertainty, saying it would try to determine the intentions of the new government regarding program engagement.
Pakistan witnessed Imran Khan’s ouster from the office of prime minister through a no-confidence vote that began late Saturday night after the opposition accused his government of mismanaging the economy and bad governance.
The opposition has now nominated Shehbaz Sharif, younger brother of former prime minister Nawaz Sharif, as new leader of the house who is scheduled to be elected as the new PM on Monday.
“We will definitely renegotiate the loan program with the IMF to get maximum concessions to stabilize our economy,” Miftah Ismail, Sharif’s close aide and former finance minister under the Pakistan Muslim League-Nawaz (PML-N) administration, told Arab News.
He said Shehbaz Sharif’s economic team was working day and night on a “robust economic plan” to steer the country out of the current financial situation.
“We’ll engage with the IMF as soon as possible and try to reach a mutual understanding in the better interest of Pakistan,” Ismail, who is expected to be appointed as finance minister in the next administration, said.
Experts maintain Pakistan’s deteriorating economy will be the biggest challenge to the new government since the foreign exchange reserves held by the State Bank of Pakistan stood at $11.3 billion on April 1, the lowest since June 2020.
Likewise, the current account deficit is expected to widen to $16-17 billion, or around 4.5 percent of the GDP, in the current fiscal year against the mere 0.6 percent during the last fiscal year.
Ismail noted it would take the new government some time to sort out the “huge burden of deficits,” hoping its economic policies would help bring relief to people.
“It will take us some weeks to fix all the economic mess,” he continued. “Rome wasn’t built in a day.”
Ismail said the outgoing finance minister, Senator Shaukat Tarin, had made some commitments with the IMF for the continuation of the loan program which were not met, adding the international lender had subsequently put the program on hold.
“We’ll see after going through all relevant documents as to how we can proceed on the economic front,” he said.
In May 2019, Pakistan and the IMF reached a staff-level agreement on economic policies for a three-year Extended Fund Facility (EFF).
Under the agreement, Pakistan was to receive about $6 billion for a period of 39 months. So far, it has received almost half of that amount. The IMF program was scheduled to end in September.