Islamabad needs ‘friendly country’ cash before IMF deal

THE International Monetary Fund (IMF) wants external financing commitments fulfilled from friendly countries before it releases bailout funds, Pakistan’s prime minister Shehbaz Sharif said on Tuesday (28).

The lender has been negotiating with Islamabad since early February to resume $1.1 billion (£893 million) in funding held since November. It is part of a $6.5bn (£5.8bn) bailout package agreed in 2019. The funding is critical for Pakistan to unlock external financing avenues to avert a default on its obligations.

“Now we are being told that the commitments from friendly countries be fulfilled and God willing we will,” Sharif told parliament in a live telecast speech.

Saudi Arabia, China and the United Arab Emirates are among the countries that have said they would help Pakistan fund its balance of payments.

An agreement would be signed once a few remaining points, including a proposed fuel pricing scheme, are settled, an IMF official said last Friday (24).

Sharif had earlier announced the government’s plan to charge affluent consumers more for fuel, with the money raised used to subsidise prices for the poor, who have been hard-hit by inflation. In February it was running at its highest in 50 years.

The petroleum minister, Musadik Malik, said last Friday his ministry was working out details. It was not a subsidy but a relief programme, he said.

“People with larger cars will pay more than people with smaller cars. Smaller cars are more fuel efficient, so people will move towards more fuel-efficient cars,” Malik said.

The IMF’s resident representative in Pakistan, Esther Perez Ruiz, said earlier the government had not consulted the fund about the scheme.

The lender wants Islamabad to explain the fuel scheme before any loan deal.

The IMF did not responded to request for a comment on the fuel pricing scheme.

Pakistan’s central bank had $4.6bn (£3.7bn) in foreign exchange reserves in the week ending March 17, enough to cover only about four weeks of necessary imports.