Govt wary of IMF-mandated ‘tough decisions’ in an election year
WASHINGTON: The government’s fear of losing popularity before the elections seems to be keeping Pakistan from finalising a deal with the International Monetary Fund (IMF) that could stabilise the economy.
Official and diplomatic sources told Dawn on Monday that both sides were still discussing the seven demands that the IMF wants Pakistan to accept before it resumes economic assistance to the country.
The demands include withdrawing electric subsidies, linking gas prices to the international market, free-floating dollars, and not blocking LCs.
The government “fears that implementing some of these demands will hike the price of essential items across the board,” a source said.
Official says waiting for caretaker govt before taking action would be ‘disastrous’
“It will make the government even more popular than it already is, so close to the elections.”
Pakistan’s power regulator has already allowed Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company (SSGC) to hike rates up to 75 percent, subject to cabinet approval.
Islamabad is waiting for the 9th review of a loan-arrangement that the previous government signed with the IMF. The review would lead to the release of the next tranche of funds to Pakistan that has been pending since September.
In August 2022, the IMF approved the seventh and eighth reviews of Pakistan’s bailout program, agreed in 2019, allowing the release of more than $1.1 billion.
IMF officials have indicated that they are willing to continue working with Pakistan, but the country should first meet some basic requirements.
“They are asking for basics, so that they can send their team to Islamabad, but the finance minister is reluctant to do so,” said an official aware of the talks.
The official said that the IMF was asking for “some movement on energy prices and the demonstration of Islamabad’s intent to reform but Finance Minister Ishaq Dar is not giving an inch.”
Officials in Islamabad urged Prime Minister Shehbaz Sharif to intervene before it’s too late. “This could have been finalised four months ago,” another official said.
The official said that he “does not personally expect much before a caretaker setup takes over the center.” Asked why, the official said: “Dar Saheb will not allow the exchange rate to go to market levels.”
And if “we do not have an IMF program, the situation will not normalize,” he added.
Another official in Islamabad said: “If Pakistan waits for the caretakers to hold talks with the IMF, it will be a disaster.”
Published in Dawn, January 24th, 2023