The IMF’s bailout package to cash-strapped Pakistan could be delayed as the global lender is pressing it to be transparent on the CPEC project and wants a written guarantee from Islamabad that its assistance will not be used to repay the loans to China, a media report said on Monday.
Pakistan is seeking USD 8 billion from the International Monetary Fund (IMF) to bail itself out from a severe balance-of-payments crisis that threatens to cripple the country’s economy.
With the generous Chinese assistance, Pakistan has so far received a total of USD 9.1 billion in financial aid packages from friendly countries during the current fiscal year.
Finance Minister Asad Umar said earlier this month that a mission of the International Monetary Fund (IMF) would visit Islamabad soon after the spring meetings of the World Bank Group, which includes the IMF, and an agreement should be signed by the end of this month.
Pakistani daily Dawn quoting official sources said the visit of the IMF mission to Islamabad for finalising the bailout package may be delayed as both sides are still engaged in an “intense discussion” on the final details of the deal.
“So, the IMF mission is now more likely to visit Islamabad in May, not April,” the sources told the daily.
The finance minister, who led the Pakistani delegation at the meetings, went to New York on Friday but his team, which includes senior officials of his ministry and other government agencies, stayed in Washington for further talks.
Umar during a press conference on Thursday said the two sides had “more or less, reached an understanding” on the bailout package and “in a day or two, we hope to reach a full agreement“.
An official familiar with the Pakistan-IMF talks said, “Islamabad still hopes to conclude the agreement before June, as they believe the bailout package would help budget prospects.”
If concluded, it would be the 14th IMF aid package for Pakistan.
The sticking points, however, are the demands for market-determined exchange rates and sharing details of Chinese loans which Pakistan is reluctant to do so.
The sources said that IMF officials were also seeking details of the China-Pakistan Economic Corridor (CPEC), along with a written guarantee from both Pakistan and China that the IMF assistance will not be used to repay loans to China.
The IMF insists on full disclosure of all financial cooperation between Pakistan and China, including assistance related to infrastructure development, nuclear power plants, joint manufacturing of JF-17 Thunder fighter jets and procurement of submarines.
The IMF is also demanding details of more than USD 6.5 billion of commercial loans Pakistan has received from China in the past two and a half years. In July, China also deposited USD 2 billion with the State Bank of Pakistan.
The finance minister is likely to visit China on April 25 for talks on the IMF concerns over CPEC and IMF will wait to hear from him before it finalises the bailout package, the daily reported.
Some of the other conditions proposed by the IMF include: making the State Bank of Pakistan independent, a market-oriented exchange rate, expanding the tax target by Rs 5,000 billion, ending income tax concessions, more taxes on salaries, narrowing the amount of taxable income from Rs12 lakh a year to Rs4 lakh, reducing electricity and gas losses, Rs140 billion electricity and gas revenue losses be recovered from consumers.
Both sides are engaged in “fine-tuning” the details of the proposed IMF programme. Pakistan wants the IMF to review some of the “restrictive” conditions it has attached to the package while the IMF insists that those conditions are absolutely essential for a successful completion of the programme.
Pakistan wants the IMF to focus on the long-term structural reforms that help revive its economy instead of attaching conditions that would be difficult to implement.
Last week, three influential US lawmakers urged the Trump adminstration to oppose the proposed multi-billion bailout package being sought by Pakistan from the IMF arguing it could be used to repay the Chinese debt.
In a letter to Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, the bipartisan group of three lawmakers — Ted Yoho, Ami Bera and George Holding — expressed their “deep concern” over the likely use of IMF’s bailout package to repay the massive Chinese debt that Pakistan has accumulated under the CPEC.
China, they said, is investing USD 62 billion in Pakistan under the CPEC. “Its debt repayment and profit repatriation terms are not transparent and have understandably raised concerns inside Pakistan,” the US lawmakers said.