Gulf Today

Pak to ask for longer-term bailout during IMF review

PM Sharif has already directed his finance team to initiate work on seeking an Extended Fund Facility ater the standby arrangemen­t expires on April 11


The Internatio­nal Monetary Fund (IMF) will hold a second and last review of Pakistan’s $3 billion stand-by arrangemen­t (Sba)this week, the finance ministry and the IMF said on Wednesday, during which the South Asian nation will ask for a new longer-term bailout.

The four-day review begins on Thursday, the ministry said in a statement, and if successful, will release a final tranche of around $1.1 billion secured by Islamabad under a last-gasp rescue package last summer, averting a sovereign debt default.

“Pakistan has met all structural benchmarks, qualitativ­e performanc­e criteria and indicative targets for successful completion of the IMF review,” the ministry added, hoping for a successful IMF staff level agreement ater the appraisal.

“The mission will be focused on (the) completion of Pakistan’s current Sba-supported program, which ends in April 2024,” the fund said through a spokespers­on.

Prime Minister Shehbaz Sharif has already directed his finance team, headed by newly installed Finance Minister Muhammad Aurangzeb, to initiate work on seeking an Extended Fund

Facility (EFF) ater the standby arrangemen­t expires on April 11.

Aurangzeb told reporters on Tuesday that Pakistan would use the opportunit­y during the IMF review to make the case for a larger, longterm programme, according to the Dawn daily.

The global lender has said it will formulate a medium-term programme if Islamabad applies for one.

The government has not officially stated the size of the additional funding it is seeking through a successor programme.

Pakistan will be “very keen to start discussion­s on another EFF with them during these talks,” the finance minister said, adding further talks will take place at the IMF and World Bank’s spring meetings in April in Washington.

Sajid Amin Javed, Deputy Executive Director at Sustainabl­e Developmen­t Policy Institute, said Pakistan needs a new IMF program immediatel­y to manage external financing needs and economic recovery.

“It is encouragin­g to see that the new government is clear, unlike the past two experience­s where engagement­s with IMF were delayed due to political baggage,” he added.

Aurangzeb aims to bring stability to a country plagued by crippling boom-bust cycles that have led to more than 20 IMF bailout programmes in the past.

The debt-ridden economy, which shrank 0.2% last year and is expected to grow around 2% this year, has been under extreme stress with low reserves, a balance of payment crisis, inflation at 23%, policy interest rates at 22% and record local currency depreciati­on.

Ahead of the stand-by arrangemen­t, Pakistan had to meet IMF conditions including revising its budget, and raising interest rates and the price of electricit­y and gas.

The IMF also got Pakistan to raise $1.34 billion in new taxes. The measures fuelled all-time high inflation of 38% year-on-year in May.

On the other hand, the Internatio­nal Monetary Fund officially launched the selection process to find the organizati­on next leader on Wednesday, with current managing director Kristalina Georgieva widely tipped for a second five-year term.

Georgieva, 70, has run the Washington-based financial institutio­n since 2019, and indicated last week that she would be “honored” to helm the organizati­on once more ater her current term expires in September -- if she is renominate­d by member states.

“The Executive Board has adopted an open, merit-based, and transparen­t process for the selection of the next Managing Director,” the IMF executive board coordinato­rs Afonso Bevilaqua and Abdullah Bin Zarah said in a statement.

“The Board intends to complete the process by end-april 2024,” they added.

Under a controvers­ial, decades-old agreement between Europe and the United States, the Internatio­nal Monetary Fund has historical­ly been led by a European, and the World Bank by a US citizen.

This unwriten arrangemen­t was reaffirmed last year when the Biden administra­tion nominated Ajay Banga, an Indian-born, naturalize­d US citizen, to run the World Bank, which sits just across the street from the IMF in Washington.

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Girls look on as they break their fast during the holy month of Ramadan in Karachi.
Agence France-presse ↑ Girls look on as they break their fast during the holy month of Ramadan in Karachi.

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