KARACHI: Pakistani finance minister Ishaq Dar said on Thursday the government had paid a “huge political cost” of carrying out reforms to satisfy the International Monetary Fund in order to secure bailout funds.
Dar was speaking at a press conference to reveal the Economic Survey for fiscal year 2022-23, a day before he presents the annual budget on Friday.
The finance minister had promised earlier this year Pakistan would take fiscal measures set by the IMF to meet its budgetary targets for the 2022-23 financial year. The prior actions 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 fuelled Pakistan's highest ever inflation, which hit 37.97% year-on-year in May, but the IMF has yet to release the $1.1 billion funding stalled since November as part of the $6.5 billion Extended Fund Facility agreed in 2019.
Meanwhile, foreign exchange reserves with the central bank have fallen to barely a month's worth of imports.
“Pakistan has made a huge political cost of meeting IMF reforms … the structural reforms, the power reforms, gas reforms, the fiscal reforms … we had to do the pending actions,” Dar told reporters.
“For Pakistan, this political cost was worth it … The revival of this [IMF] program was important because of Pakistan’s credibility.”
On Thursday, a top IMF official said Pakistan had to satisfy the IMF on three counts, starting with a budget to be presented on Friday, before its board will review whether to release at least some of the $2.5 billion still to be disbursed under the lending programme that will expire at the end of June.
Esther Perez Ruiz, the International Monetary Fund's resident representative for Pakistan, said that there was only time for one last IMF board review before the scheduled end of the $6.5 billion Extended Fund Facility (EFF).
The IMF had tasked Pakistan with securing external financing commitments for $6 billion from other sources, but so far it has only obtained commitments for $4 billion, mostly from Saudi Arabia and the United Arab Emirates.