KARACHI: The International Monetary Fund (IMF) may delay staff level agreement with Pakistan despite meetings all the conditions placed by the IMF on Pakistan under 9th review agreement, the sources in Finance Ministry said here on Monday.
“The country’s economy is facing uncertainty despite all assurances given by the official economic managers,” the analyst said. Many analysts mentioned in their reports that this is probably the longest delay from the IMF side.
The delay has multiple negative consequences for Pakistan as all financial sources have simply dried up. It has become extremely cumbersome for the economic managers to justify the delay with the incumbent finance minister trying hard to prove his worth and he has been left with no option but to fight for his position.
Spokesman of the America’s foreign affairs ministry, the foreign media reported, had refused the government of Pakistan to support it in this connection saying that Pakistan has to deal with the IMF itself. “Finance Minister Ishaq Dar will start negotiation with the American authorities in this regard,” the source claimed.
IMF has clearly told Pakistan to boost its State Bank of Pakistan (SBP) reserves upto $10 billion, which is impossible without assistance of friendly countries. Now, the friendly countries are also waiting for the nod of the Fund to deposit a promised amount of $5 billion in SBP.
The State Bank of Pakistan (SBP) is feeling the pinch of this uncertainty and its governor has consistently shied away from giving a date of finalising the IMF staff level agreement though he did not hesitate while forecasting reduction in non-debt creating inflows.
The worry, however, was clearly evident when the governor SBP painted a bleak external sector picture indicating that the combined inflows, on account of exports and foreign remittances, will be $14 billion to $15 billion less than the budgetary estimates made by the federal government.
SBP governor also mentioned current account deficit projection (CAD) that he gave for this fiscal year, however, was still out of line with the IMF’s forecast as it will be around $7 billion a figure that is $1.2 billion less than the IMF’s forecast though it is in line with the assessment of the incumbent foreign minister.
There are real reasons behind the prevailing negativity as the CAD quantum has a direct bearing on the external financing gap that Pakistan sees at $5 billion but the IMF has projected at $7 billion.
It was however pointed out that the reduction in the CAD is artificial and has been achieved by closing industries and inflicting damage on the people. The CAD has remained $3.8 billion during the first seven months of the current fiscal year and it was down by 68%.
The SBP confirmed this fact by stating that the economy continues to depict signs of a policy-induced slowdown, mainly in response to monetary policy tightening and administrative measures to counter inflationary pressures and address external challenges.
The governor was rather reticent about the fiscal policy though tried to maintain that imports will be opened but only after the completion of the IMF’s 9th review.
The exports may also remain in the range of $28 billion to $29 billion that is almost $9 billion to $10 billion less than the official target set at the time of the budget. The remittances will be around $27 billion to $28 in current fiscal year.
The IMF has refused the government to borrow from the local banks. It was reported that the government tried to convince the IMF that the direct borrowing option would be used for emergency purposes only aimed at avoiding any blackmailing from commercial banks. However, the IMF did not agree to direct lending as it wanted to avoid any further distortion in the debt market.