No deal: IMF leaves crisis-hit Pakistan
ISLAMABAD, Feb 11, (AFP) - An IMF team left Pakistan on Friday after crisis talks with the government failed to deliver a deal on financial aid that would help the South Asian country avert economic collapse. After months of deadlock, the International Monetary Fund delegation arrived last week for last-ditch negotiations with a government fearing the political consequences of enforcing bailout conditions in an election year.
Pakistan's economy is in dire straits, stricken by a balance-ofpayments crisis as it attempts to service high levels of external debt amid political chaos and deteriorating security. Inflation has rocketed, the rupee has plummeted and the country can no longer afford imports, causing a severe decline in industry.
“Considerable progress was made during the mission on policy measures to address domestic and external imbalances,” the IMF said in a statement. “Virtual discussions will continue in the coming days to finalise the implementation details of these policies.” The IMF is demanding that the nuclear-armed nation boost its pitifully low tax base, end tax exemptions for the export sector, and raise artificially low petrol, electricity and gas prices meant to help low-income families.
Prime Minister Shehbaz Sharif previously called the conditions for the $1.2 billion loan instalment “beyond imagination”.
Finance Minister Ishaq Dar addressed the nation after the IMF team left the country on Friday morning, saying talks had “concluded successfully” and that a draft memorandum on broadly agreed policies had been shared by the lender with the government. He said petrol prices would rise by roughly four percent and additional taxes would be imposed.
Economic analyst Abid Hasan, a former adviser to the World Bank, said “there will be disappointment in the business community”. “The only way stability can be achieved is through a deal. This has heightened the uncertainty,” he told AFP in the capital Islamabad.
Years of financial mismanagement and political instability have damaged Pakistan's economy -exacerbated by a global energy crisis and devastating floods that submerged a third of the country.
After months of holding out in search of alternatives, the government began to bow to IMF pressure in mid-January, loosening controls
on the rupee to rein in a rampant black market in US dollars -- a step that caused the currency to plunge to a record low. Authorities also hiked petrol prices by 16 percent.
Rana Sadiq, a 65-year-old real estate worker, has had to sell his car and commute on a motorbike to save money. “Gas bills, electricity bills, petrol prices, fruit and vegetable prices have all doubled in the last few months,” he told AFP.
“I can't meet the monthly expenses. Before, my children used to eat fruit every day -- now I take fruit home once a week.” On Thursday, the central bank released data saying its foreign exchange reserves had plunged by $170 million in a week, standing at just $2.9 billion as of last Friday.
Since January, the world's fifth most populous nation is no longer issuing letters of credit, except for essential food and medicine, causing a backlog of raw material imports the country can no longer afford.
The IMF is demanding that the nuclear-armed nation boost its pitifully low tax base, end tax exemptions