ISLAMABAD: Pakistan Prime Minister Shehbaz Sharif has assured that his country would “fully honor” an agreement reached with the International Monetary Fund (IMF) that allowed the release of $1.1 billion funds to the cash-strapped South Asian nation, Pakistani state media reported on Saturday.
Pakistan’s 11th hour deal for $3 billion from the IMF got official approval this week following after months of negotiations between the two sides. Saudi Arabia and the UAE followed with $2 billion and $1 billion infusions.
This fresh cash means Pakistan is unlikely to default on its debt in the next six to nine months, though its reserves remain precariously low, only roughly enough for two months of imports.
In a telephonic conversation with IMF Managing Director Kristalina Georgieva on Saturday, PM Sharif said he made it clear to his economic team that even the slightest violation of the agreement would not be tolerated.
“We are in government till 12th of next month and then caretaker government will assume responsibilities,” Sharif was quoted as saying by state-run Radio Pakistan broadcaster. “The caretaker government would continue to honor the agreement.”
Elections in the politically volatile country must be held by early November, with experts saying even in the near-term, Pakistan will have to stay on top of tricky reforms such as allowing its currency to move somewhat freely.
The IMF MD said a strong partnership and mutual trust had now been established between Pakistan and the IMF and that she was confident that the South Asian country would honor the agreement, according to the report. She said the IMF would continue to extend every possible support to Pakistan.
However, the real challenge for Pakistan, which is still recovering financially and physically from last year’s devastating floods, comes after the contentious elections, when it will likely need to secure a longer-term IMF program.
This will likely require punishing, and unpopular, cuts to food and fuel subsidies, increases to electricity prices and loosening controls on the rupee.
If elected again, Sharif said, they would turn around the economy with the support of IMF. He appreciated the sentiments of the IMF MD for the poor people.