When will Pakistan seek IMF bailout?

dubai — The State Bank of Pakistan expects the rupee will strengthen if the political situation gets better and a stable government is formed in the country after the elections, said Qadir Bakhsh, additional director, State Bank of Pakistan.

“The rupee’s weakness is due to imbalance of imports and exports. Instability will remain unless we resolve this imbalance. As the elections results came out, the rupee appreciated and if the political situation gets better, the rupee will fare better. Hopefully, if there is a political stability after this new government comes into power, rupee can appreciate,” Bakhsh told Khaleej Times recently.

Analysts had earlier said that Pakistan’s central bank devalued rupee by over 20 per cent in seven months because the IMF wanted Pakistan to let the market dictate rupee’s rate and don’t intervene in order to obtain loan from the fund.

Bakhsh revealed that Pakistan doesn’t need to go to the International Monetary Fund (IMF) for loan if the country can meet its import bill for the six months.

“If we are able to reduce the deficit and exports and forex reserves pick up as a result of more funds inflow from the tax amnesty scheme for Pakistanis, the pressure on current account will ease. If we have six months of imports reserves, then Pakistan doesn’t need to go to the IMF,” Bakhsh said.

Pakistan’s current $9 billion forex reserves can meet import bill for two months only. Many analysts expect Pakistan to turn to the IMF for a bailout, which is expected to be in excess of $12 billion. Bakhsh said the new political government will decide whether to approach the IMF or not for the loan. Asad Umar, who is likely to be the finance minister, has showed concerns about the dwindling foreign exchange reserves.

“The crisis is severe and requires measures so urgent that no option can be ruled out,” Umar told reporters during a recent interview with Pakistani media.