IMF sees substantial progress by crisis-hit Pakistan. When will it unlock loan?
1 min read 21 Mar 2023, 07:27 AM ISTPakistan's government has raised taxes, cut energy subsidies, and raised interest rates to a 25-year high to tamp down prices to unlock the next tranche of IMF bailout program.
PremiumCrisis-hit Pakistan has made ‘substantial progress’ toward meeting policy commitments needed to unlock billions of dollars in loans the country needs to avoid default, the International Monetary Fund (IMF) said, adding that a state-level agreement will follow once the few remaining points are closed.
Esther Perez Ruiz, the IMF’s resident representative for Pakistan said, “Ensuring there is sufficient financing to support the authorities in the implementation of their policy agenda is the paramount priority", Bloomberg reported.
Pakistan Finance Minister Ishaq Dar said last week that the IMF wants to see countries finalize commitments they’ve made to help cash-strapped Pakistan shore up its funds.
Pakistan needs to repay about $3 billion of debt by June, while $4 billion is expected to be rolled over.
The crisis-hit country has failed to meet several deadlines to secure funds to stave off a default, raising concerns that it may have to pause debt repayments. To seal the bailout, authorities have raised taxes, cut energy subsidies, and raised interest rates to a 25-year high to tamp down prices, but some issues are yet to be resolved.
On the IMF's behest, Pakistan unveiled a mini-budget on February 21, raising the GST rate from 17% to 18% to fetch additional tax revenues of ₹170 billion to unlock the IMF tranche.
The inability of successive governments to meet IMF’s prescriptions is leading to a delay, said Luqman Nadeem, general partner at FlatRock Associates. The current political crisis could make make the “IMF more reluctant to disburse any funds," he said.
Pakistan needs funds to revive its $350 billion economy, ease widespread shortages and rebuild its foreign currency reserves. The nation’s dollar stockpile has fallen to less than a month’s worth of imports, restricting its ability to fund overseas purchases, stranding thousands of containers of supplies at ports, forcing plant shutdowns and putting tens of thousands of jobs at risk.
(With Bloomberg inputs)
