Finance Minister Asad Umer Monday revealed that the bailout package ‘agreed in principle’ with the International Monetary Fund (IMF) will be around $6-8 billion.
Briefing the National Assembly Standing Committee on Finance, Revenue and Economic Affairs, Asad Umer said the IMF has finalised a bailout package for Pakistan during talks between the two sides at a recent visit by the Pakistani delegation to the United States. Pakistan will receive funds from the World Bank and the Asian Development Bank immediately following the agreement, he said, adding that the rescue package will ease pressures on country’s foreign reserves. He further assured that the capital market will also improve following the IMF program.
External account pressure reduced Pakistan’s international reserves to $6.6 billion by mid-January 2019, but with short-term financing from Saudi Arabia, the United Arab Emirates and China, foreign reserves increased to $10.5 billion at the end of March.
The finance minister told the committee that an IMF mission will visit Islamabad during the last week of April, when the bailout package amount will be finalized. He said the public will not be impacted by the IMF agreement, and that the government has no plans to raise electricity prices. He said a medium-term economic framework has been prepared and shared with the prime minister and the economic advisory board. He said the agreement with the IMF will also be shared in the session of the standing committee.
Asad Umer claimed that the WB and ADB have lauded the ongoing economic reforms in Pakistan. He said now the rapidly falling foreign exchange reserves will stabilize.
The finance minister said Financial Action Task Force (FATF) President Marshall Billingslea has been informed that India has never remained a ‘fair umpire’ while taking Pakistan’s case at the FATF forum. Though the FATF president has assured that no politics will be involved in the matter, the minister said Pakistan has serious reservations over the FATF committee which will be presided by India. The minister said the FATF chief during the US visit assured him that any decision about Pakistan will be taken on technical grounds. Pakistan will send a draft detailing its implementation on FATF’s recommendations later in the day, he said, adding that a delegation of the FATF will visit Pakistan in the third week of May to review the implementation efforts.
Meanwhile, Minister of State for Revenue Hamad Azhar said an ‘agreement in principle’ has been reached on all outstanding issues with the IMF during the finance minister’s recent successful visit to the US. He said technical details and formalities will be finalised during the IMF’s staff-level visit to Pakistan later this month.
Furthermore, the office of the IMF resident representative said in a statement that Pakistani authorities and global lender’s staff held constructive discussions during the IMF/World Bank spring meetings in Washington DC towards an IMF-supported programme. “At the request of the [Pakistani] authorities, an IMF mission will be going to Pakistan before the end of April to continue the discussions,” it said.
The long-delayed rescue package will be Pakistan’s 13th IMF bailout program since the late 1980s and comes at a time of worsening economic outlook for the South Asian nation of 208 million people.
Pakistan’s central bank last month lowered growth forecasts and raised interest rates at a time when inflation is at a five-year high. The rupee currency has also lost about 35 percent since December 2017.
The bailout has been delayed since last year as Pakistani officials have said they worry conditions attached to the proposed IMF loans could hurt economic growth.
Analysts have been expecting the package to be concluded this month but say the contours of any proposed assistance program are unclear. “There are questions if there will be any further devaluations, how much interest rates will be hiked, what taxation measures are expected of Pakistan, and will there be any further increase in electricity or gas prices?” said Saad Hashemy, Chief Economist for Pakistani brokerage house Topline Securities. The government has obtained temporary relief from close allies such as China and Saudi Arabia with short-term loans worth more than $10 billion to buffer foreign currency reserves and ease pressures on the country’s current account. But analysts have called an IMF bailout inevitable, with Pakistan also facing an increasing fiscal crunch ahead of the annual budget spending review for the next financial year starting July 1.