—PM approves immediate negotiations with IMF focused on ‘stabilisation recovery programme’
—Minister says will seek a plan having ‘minimum impact’ on low-income classes, burdens wealthy citizens
ISLAMABAD: After weeks of constant drama, the federal government on Monday finally announced that it is going to seek the International Monetary Fund’s (IMF’s) assistance in a bid to tackle the country’s financial woes.
In a video message, Finance Minister Asad Umar said that Prime Minister Imran Khan has given his approval for immediate negotiations with the IMF.
“The prime minister, after consulting everyone, decided today that we should open talks with the IMF,” Umar said.
The decision precedes weeks of statements made by the Pakistan Tehreek-e-Insaf (PTI) led government at first denying that it was going to the IMF, followed by the finance minister stating how the government might seek assistance from friendly countries such as China and Saudi Arabia to finance its external debts, to saying that the country is not desperate enough to go to the IMF.
The government took the decision after the friendly countries did not bail it out despite Prime Minister Imran Khan himself going to Saudi Arabia seeking investment. Advisor to Prime Minister on Commerce Razak Dawood, who had accompanied the PM, described his Saudi Arabia visit as “it was awful to beg from Saudi Arabia”.
Before heading off to Bali, Indonesia for an annual meeting with the IMF and the World Bank later this week (from October 12 to 14), the ministry of finance announced that it will immediately start negotiations with the IMF.
The negotiations will be aimed at reaching a “stabilisation recovery programme” which can be used to tackle the economic crisis, the minister said, adding that with the IMF programme, the government will aim to have a “minimum impact” on low-income classes, while passing on the burden to wealthy citizens.
The premier had on Sunday hinted at approaching the IMF for “bridging loans” during the critical phase the country is passing through, besides exercising options like seeking help from friendly countries to deposit funds in the State Bank to boost reserves.
“We may go to IMF for a loan to handle the country’s financial issues, but, first we will try to get assistance from other countries as we have requested three countries to deposit money in Pakistan’s state bank that would help boost national reserves.”
The IMF, after consultations with the finance minister, had earlier stated that Pakistan needed to quickly secure “significant external financing” to stave off a crisis, though it did not suggest who could supply the money.
Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) led government immediately faced an economic crisis when it took charge in August. Finance Minister Asad Umar had then said that foreign reserves needed to be boosted by at least $8 billion.
The ministry of finance in an official statement said, “Immediately upon assuming office, the present government had expressed serious concerns over the dire economic situation of the country and had committed to undertake a quick evaluation of all possible options. The government inherited 6.6 per cent of fiscal deficit, more than a trillion rupees of unaccounted for losses in the energy sector and an unprecedented and debilitating current account deficit running at $2 billion a month.”
“To correct the underlying imbalances, fiscal and monetary actions needed to be undertaken without delay. In this regard, the Finance supplementary (Amendment) Act, 2018 by the government and the policy rate increases by the State Bank of Pakistan (SBP) are actions taken to stabilise the macroeconomic situation. In addition, regulatory duties on non-essential imports have had to be introduced to curb the unnecessary growth in imports,” it added.
The government had announced that it was ready to take ‘decisive corrective measures’ to put the national economy back on track, raising the prospects for early finalisation of an International Monetary Fund bailout package, carrying huge political and economic costs.
The Ministry of Finance issued an official handout that had a striking similarity with IMF’s views. It indicated that the government had finally made up its mind to go to the IMF.
The handout was issued a day after the economic managers informed the prime minister that the IMF was the only viable option to steer the country out of its current economic crisis. “Going forward, the government is committed to taking decisive corrective adjustments to restore the economy on a path of stability and growth,” stated the finance ministry.