The International Monetary Fund said Pakistan has a few more tasks before it can unlock a $6.5 billion loan to avoid a default, putting pressure on the government to secure assurances from countries that have promised financing support.
Pakistan is now the only South Asian country that’s yet to secure a bailout from the multilateral lender as Sri Lanka clinched financing this week and Bangladesh pushes on with carrying out IMF-mandated reforms.
“A staff-level agreement will follow once the few remaining points are closed,” said Esther Perez Ruiz, the IMF’s resident representative for Pakistan. “Ensuring there is sufficient financing to support the authorities in the implementation of their policy agenda is the paramount priority.”
Finance Minister Ishaq Dar said last week that the IMF wanted to see countries finalize commitments they’ve made to help Pakistan shore up its funds before signing off on the bailout package. Pakistan needs to repay about $3 billion of debt by June, while $4 billion is expected to be rolled over.
ALSO READ: Nothing is cheap, nothing: Pakistan’s inflation at 58-year high, a record
Pakistan has taken tough measures including increasing taxes and energy prices, and allowing its currency to weaken to restart a $6.5 billion IMF loan package. The funds will offer some relief to a nation still reeling from a dollar shortage that has raised the probability of the economy slipping into a recession ahead of elections this year.
Ruiz said the Washington-based lender wasn’t consulted on the government’s plan to raise fuel prices for wealthier motorists to finance a subsidy for lower-income people.
“Fund staff are seeking greater details on the scheme in terms of its operation, cost, targeting, protections against fraud and abuse, and offsetting measures, and will carefully discuss these elements with the authorities,” she said.
This is not the first time petrol price subsidies have been a sticking point for IMF. The previous government led by former premier Imran Khan had given out petrol subsidies, which stalled the IMF program last year.
ALSO READ: Pakistan ministers don’t wish to return luxury cars amid economic crisis: Report
Pakistan’s benchmark KSE-100 Index fell 0.4%, down from for the fourth straight session. The rupee fell 0.8% to close at 284.03 a dollar, near its record low on March 20 as investors are concerned over the continued delays in resuming the IMF program.
The nation has failed to meet multiple deadlines in the past to secure a deal for a loan that was scheduled to be released in November.
The government should have taken the IMF into confidence before announcing such a scheme, said Tahir Abbas, head of research at Karachi-based Arif Habib Ltd., from Karachi. “The fuel subsidy could further delay the much-awaited resumption of the loan program.”