Pakistan’s government said the International Monetary Fund wants ‘friendly” countries to honor their commitments to fund the cash-strapped country before the multilateral lender signs off on a $6.5 billion bailout program.
(Bloomberg) — Pakistan’s government said the International Monetary Fund wants ‘friendly” countries to honor their commitments to fund the cash-strapped country before the multilateral lender signs off on a $6.5 billion bailout program.
This has led to a delay in concluding talks with the IMF for the program, Pakistan Finance Minister Ishaq Dar told the upper house of parliament on Thursday. Certain countries had made pledges to support Pakistan during the IMF’s review and it “is asking they should actually complete and materialize those commitments,” he added.
Pakistani officials have been guiding for an IMF agreement in a few days and had planned to complete the program in June. However the nation has failed to meet multiple deadlines in the past.
The bailout funds from the IMF would throw an economic lifeline to Pakistan that’s racing against time to avoid a default. The country needs to repay about $3 billion of debt by June, while $4 billion is expected to be rolled-over. Pakistan’s dollar bonds due in 2031 rose 0.2 cents on the dollar on Friday, snapping seven days of losses.
A pact with the IMF would also open up access to other financing avenues for Pakistan, which only has reserves for a few weeks of imports and whose currency is one of the weakest performers in Asia.
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Dar didn’t the name the countries who made commitments but Saudi Arabia, the United Arab Emirates, Qatar and China have helped in recent months and weeks by rolling over debts and giving dollar deposits and oil on credit. In early March, the Industrial & Commercial Bank of China Ltd. released $500 million to Pakistan as the first installment of a $1.3 billion loan.
Pakistan’s government has completed all IMF demands, Dar said. The government has taken tough measures including raising taxes, energy prices and interest rates to unlock funding from its IMF loan program.
The government’s popularity has plummeted in an opinion survey with the majority of respondents blaming prime Minister Shehbaz Sharif and his ministers for the economic crisis while showing support for his arch-rival Imran Khan. The former premier’s growing popularity may force Sharif’s coalition to boost welfare spending to woo voters ahead of elections later this year, Bloomberg Economics analyst Ankur Shukla wrote last month.
And that would break its commitments to the IMF on fiscal consolidation and potentially jeopardize aid from the institution, he added.
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The IMF has not indicated that political uncertainty is causing any delay in reviving the bailout, Sharif told reporters earlier this week. “We have accepted all the conditions, the very tough conditions set by the IMF,” he said.
–With assistance from Karl Lester M. Yap.
(Updates throughout, adds line on bond markets)
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