Financial bailout: Govt to start talks with IMF today


Shahid Abbas


Pakistan to begin talks with the International Monetary Fund on Wednesday for a financial bailout package to help end spiralling current account crisis.

The IMF delegation headed by Herald Finger will stay in Pakistan till November 20th, and will finalise the conditions for loan.

The Ministry of Finance, the State Bank of Pakistan (SBP), the Federal Bureau of Pakistan (FBR) and other institutions officials would participate in the talks.

It is expected that IMF would be briefed regarding taxation schemes and crackdown against tax evaders.

In case of successful talks, Pakistan can avail from six to eight billion dollars in loan.

The talks set to begin on Wednesday (today) will continue for nearly two weeks over what would be the country’s 13th IMF bailout since the 1980s to help it end a spiralling current account crisis.

Finance Minister Asad Umar says $12 billion is required immediately, a large chunk of which is expected to be drawn from the IMF.

“The initial three to four days (of the talks) are for technical discussions,” Finance Ministry Spokesperson Noor Ahmed told Reuters.

“Thereafter, there will be policy dialogue on the specific contents of the programme.”

Pakistan announced last month a $6 billion assistance package from Saudi Arabia, split into $3 billion in foreign currency support and a further loan worth $3 billion in deferred payments for oil.

The announcement followed Prime Minister Imran Khan’s visit to Riyadh last month for an investment conference that was boycotted by several other leaders following the killing of a Saudi journalist at the country’s consulate in Istanbul.

Khan had said before the visit that his country’s foreign currency reserves were at a four-year low, equivalent to less than two months of imports and barely enough to make its debt repayments through the rest of the year.

“The support we received left and right will have an overall impact on our microeconomic numbers,” Ahmed said.

“The programme that will be designed (with the IMF) will be stability focused … They will look at the numbers and take their decision.”

Pakistan’s current account deficit widened 43 per cent to $18 billion in the fiscal year that ended in June, while the fiscal deficit has ballooned to 6.6 per cent of gross domestic product.

Khan was in China last week where he held talks on economic help.

The PM appealed to “friendly countries” for assistance in an effort to avoid going to the IMF, or at least reduce the size of any bailout package.

Pakistani officials have been wary of the IMF imposing harsh conditions compared to the last bailout in 2013 when Islamabad was given repeated waivers and avoided serious reforms after receiving $6.7 billion.

Finance Minister Asad Umar on Tuesday claimed that Pakistan’s “balance of payment crisis was over” and assured that China was committed to providing short-term relief to Pakistan as well — the modalities of which, he said, would be discussed in a new round of discussions in Beijing on Friday.

“The long-term solution to the balance of payment crisis is to increase our exports, and to do that we should have enough income so that we do not need to borrow,” Umar, who was a part of the Prime Minister Imran Khan-led delegation that visited China recently, explained during a press conference today.

“In this regard, we have received a commitment from the highest level.”

“Regarding the doubling of our exports, we are not talking long-term. We have (this target) for the ongoing year. We have also discussed short-term reliefs. A decision in principle has been taken, but to discuss its modalities our contingent is going to Beijing on the 9th,” the finance minister said.

“So this curiosity that the people have will also be resolved soon. We had told you about the $12bn financing gap, of which $6bn have come from Saudi Arabia, and the rest has come from China so the immediate balance of payment crisis of Pakistan has ended. I want to make that clear in unequivocal terms. We do not have any balance of payment crisis now. ”

A statement released by the finance ministry echoed Umar’s remarks, adding that “a senior-level delegation comprising of federal secretaries of finance, foreign affairs, planning and development and commerce along with the State Bank of Pakistan’s governor will undertake a visit to China during the current week to work out the modalities”.