ISLAMABAD: Prime Minister Shehbaz Sharif has said Pakistan was “very hopeful” of finalizing a deal with the International Monetary Fund (IMF) this month but the nation would “tighten our belt” and move on if the deal fell through.
The PM’s comments come as hopes for a resumption of an IMF deal are diminishing, with a bailout program agreed in 2019 due to expire on June 30 at the end of the 2022-23 fiscal year.
The IMF funding is crucial for the $350 billion South Asian country, which faces an acute balance of payments crisis. This has raised concerns of a sovereign default, something which the minister dismissed.
The central bank's foreign reserves have fallen as low as to cover barely a month of controlled imports. Pakistan's economy has slowed, with an estimated 0.29% GDP growth for 2022-2023.
“We are still very hopeful that the IMF program will materialize. Our ninth review by the IMF will match all terms and conditions and, hopefully, we’ll have some good news this month,” Sharif said in an interview to international media published on Monday, after a visit by the PM to the Turkish capital Ankara for President Recep Tayyip Erdogan’s inauguration.
“We have met all conditionalities. I repeat, each and every requirement of the IMF as prior actions has been met,” Sharif said. “Some of those actions are usually met after the board’s approval, but this time the IMF required that those actions be met before the board’s approval, so we have met them.”
On contingency plans in case the IMF talks fall through, Sharif said Pakistan had faced challenges in the past, and if needed, will “tighten our belt” and rise again.
The IMF's $1.1 billion funding to Pakistan, which is part of the $6.5 billion Extended Fund Facility agreed in 2019, has been held up since November.
Islamabad hosted the IMF mission in February to negotiate a series of fiscal policy measures to clear the 9th review.
Pakistan had to complete a series of prior actions demanded by the IMF, which included reversing subsidies, a hike in energy and fuel prices, jacking up its key policy rate, a market-based exchange rate, arranging for external financing and raising over 170 billion rupees ($613 million) in new taxation.
The fiscal adjustments have already fueled Pakistan's highest ever inflation, which rose to 37.97% in May.