IMF giving Pakistan ‘tough time’ over unlocking funds
We are facing ‘unimaginable’ economic crisis, PM tells a meeting. Hours ater Shahbaz’s remarks, rupee hits a record low against the US dollar in a steep slide since last week; Dar looks to philanthropists to collect dollars
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nPPrime Minister Shahbaz Sharif said on Friday the International Monetary Fund (IMF) was giving his country a tough time over unlocking stalled funding from a $6.5 billion bailout, at a time of “unimaginable” economic crisis.
Hours ater his remarks, the Pakistani rupee hit a record low against the US dollar in a steep slide since last week.
Shahbaz made the comments in a meeting of civil and military leaders in the northwestern city of Peshawar he chaired to prepare a response to Monday’s mosque bombing that killed more than 100 people.
“Our economic situation is unimaginable,” the premier said. “As you know, the IMF mission is in Pakistan, and that’s giving us a tough time,” he said.
“You all know we are running short of resources,” Shahbaz said, adding Pakistan “at present was facing an economic crisis.”
Shahbaz made the remarks in the context of funds the country might need for any military or counter-terrorism response to the resurgent militancy.
The IMF mission is visiting Pakistan to discuss fiscal consolidation measures the institution needs from Pakistan to clear a 9th review of its Extended Fund Facility, aimed at helping countries facing balance-of-payments crises.
Pakistan’s central bank reserves at present stand at $3.09 billion, the lowest since 1998 and not enough to cover the cost of three weeks of imports.
The IMF’S demands aimed at controlling the country’s budget deficit have led to Pakistan leaving its currency to market based exchange rates and hiking fuel prices.
The Pakistani rupee fell by 1.9% to a record low of 276.58 per dollar in the inter-bank market on Friday, according to the central bank.
The local currency has dropped 16.5% since the artificial cap was removed last week to leave the rupee’s value to be decided by a market-based exchange rate regime.
The rupee also shed 2.65% against the US dollar on the open market, according to the association of exchange companies.
Islamabad is in a $6.5 billion IMF programme. An IMF delegation is in Pakistan to restart talks stalled since November for $2.5 billion funds yet to be disbursed.
Still, despite the economic situation, Shahbaz said his country will do whatever possible to fight militancy.
Meanwhile, the federal government is looking to tap the kindness of philanthropists to replenish its rapidly depleting dollar coffers.
This comes ater exhausting several traditional sources of foreign exchange.
But unlike the recent fund-raising campaign for dams, where the government remained front and centre, an upcoming drive to generate freeof-cost dollars from abroad will likely be led by social workers with rock-solid credibility and proven track records.
During his address to a conference on Islamic finance via video link, Finance Minister Ishaq Dar asked the central bank governor to coordinate with a group of philanthropists in their effort to raise dollars from overseas Pakistanis to overcome the foreign exchange shortage.
His remarks came in response to a passionate announcement by Bashir Farooqi, founder and chairman of Saylani Welfare International Trust, that he would hold a press conference with other noted philanthropists to ask overseas Pakistanis for dollars.
Farooqi said the leadership of the Akhuwat Foundation, The Citizens Foundation and Indus Hospital would join him in his atempt to raise funds to end the country’s liquidity crunch.
They will try to generate $2 billion for five years, he said.
The funds won’t generate any profit for the depositors, meaning the scheme entails the parking of dollars for a fixed period of time without any cost to the exchequer.
The borrowed dollars will help bring back the lost jobs for “hundreds of thousands of people” as businesses will be able to open the leters of credit (LCS) for imported raw materials.
However, an economist associated with a research house said the drive appears to be a last-ditch effort to plug the external financing gap and pave the way for the signing of a leter of intent with the International Monetary Fund.