Dar blames ‘trust deficit’ with IMF for delayed deal
• Claims govt ‘very close’ to signing staff-level agreement with lender
• Says current administration trying its best to put economy back on track
ISLAMABAD: Finance Minister Ishaq Dar on Thursday blamed a delay in the International Monetary Fund (IMF) programme on the previous government, whose “failure to meet commitments” created a trust deficit that has continued to bite.
However, he said the current government was trying its best to put the economy back on track and complete the IMF programme at any cost. He said the country was “very close” to signing a staff-level agreement with the IMF, which would offer a critical lifeline for taming a balance-of-payments crisis.
An agreement would release $1.1 billion, which is part of a $6.5bn bailout package the IMF approved in 2019, which analysts say is critical if Pakistan is to avoid defaulting on external debt obligations.
“We seem to be very close to signing the staff-level agreement, hopefully, God willing, in the next few days,” Mr Dar said at a seminar organised by the Ministry of Finance in Islamabad with international lenders on strengthening public finance management.
“I and my team are absolutely committed to completing this programme to the best of our ability,” he said. “We have been in the review and I think it has taken longer than it should have, in my opinion.”
Mr Dar said the upcoming budget 2023-24 would envisage steps for taking the country out of the quagmire the present government inherited and putting the nation back on track and on a high and sustainable economic growth trajectory.
He said the Pakistan Democratic Movement (PDM) coalition government was handed over the economy that was in a shambles. He said the previous government signed the IMF agreement, but instead of honouring its promises, it reversed the conditions it had already implemented.
“This created a lot of trust deficit” with the international community, he said, adding that these were not agreements of an individual but commitments of a sovereign state.
Mr Dar said the current bailout programme had taken longer than all the previous programmes because of the trust deficit.
He said reforms in the energy sector, which has piled up more than Rs4 trillion ($14.18 billion) in debt, were the most critical to get the economy back on track. “The power sector has to be structurally reformed and fixed and let me endorse that the issue was and has been very grave,” he said.
However, he said that “we are now in a position to move forward with full confidence” and emphasised that the country had the strength and resilience to overcome the challenges but had been missing consistent policies and suffered fiscal mismanagement over the years.
He said the only IMF programme Pakistan ever completed was during PML-N’s tenure and even the powerful military dictators could never go beyond ninth or tenth reviews of the lender’s programme.
The finance minister said Pakistan was passing through very challenging times and all have to make contributions to come out of the quagmire the present government inherited.
To achieve this, he said the government had already announced austerity measures under which the prime minister has banned the purchase of all vehicles and all other new durable items until June 2024 on top of a 15pc cut on current and non-employee expenditure at all the ministries, divisions and attached departments.
Luxury vehicles from the cabinet members had been withdrawn and the cabinet members would be bound to travel economy class and not to stay at five-star hotels anywhere at home or abroad.
However, this was followed by devastating floods that caused over $30bn losses and damages to the economy and the federal and provincial governments had to make available Rs452bn for relief and rehabilitation activities.
*Published in Dawn, March 10th, 2023