ISLAMABAD: The resident representative of the International Monetary Fund (IMF) said on Monday that policy commitments made by Pakistani authorities to resume the support program continue to apply.
The country was only recently able to restart an IMF bailout package after agreeing to undertake difficult reforms. One of the agreements was to implement a market-determined exchange rate and to stop government intervention in the central bank.
Pakistan’s newly appointed finance minister, Ishaq Dar, last week also slashed fuel prices — reversing a policy of raising prices monthly through added levies to ensure enhanced revenues as agreed with the IMF. Dar also said on Monday that the country’s currency would strengthen to under 200 rupees to the dollar.
The rupee is currently at around 227 to the greenback, and the currency has been in turmoil, falling as much as 30 percent this year.
“Policy commitments made by the Pakistani authorities as part of the Seventh and Eighth review under their IMF-support program continue to apply,” IMF representative in Islamabad Esther Pérez Ruiz told Reuters.
She said policy discussions, including how to target support to those affected by the floods while maintaining macroeconomic stability, will commence in coming weeks after the damage assessment report becomes available.
Pakistan’s economy is facing a balance of payments crisis, a widening current account deficit, a slide in currency, and double-digit inflation.
In September, Pakistan’s bonds slumped to just half their face value after the Financial Times said a United Nations development agency was urging the cash-strapped country to restructure its debt.
A memorandum the United Nations Development Programme (UNDP) was set to hand Pakistan’s government said its creditors should consider debt relief in the wake of the floods, according to the Financial Times.
The memorandum further proposed debt restructuring or swaps, in which creditors would forego some repayments in exchange for Pakistan’s agreement to invest in climate change-resilient infrastructure, the paper said.
Neither the foreign office in Islamabad or a UNDP spokesperson in Pakistan immediately responded to Reuters’ request for comment on the memorandum. The country’s finance and information ministers could also not be reached.
The bond market reaction strengthened fears of another default by Pakistan, hammering its international market government debt.
One of the main sovereign bonds due for repayment in 2024 slumped more than 10 cents to about 50 cents on the dollar, while another due in 2027 fell to about 45 cents.