Talks between the International Monetary Fund (IMF) and Pakistan have remained inconclusive, crushing Imran Khan’s government’s expectation to sign the $8 billion bailout deal.
The final round of consultations between Pakistan and IMF, that were scheduled to end on Friday, are now expected to continue over the weekend as both parties have not come to a mutual agreement.
IMF has put forward a strict demand of actions Pakistan will have to undertake if it wants to get the IMF bailout, which involves a major increase in tax returns, devaluation of rupee and increase of exchange rates.
Pakistan has been asking the IMF to be flexible with its demands as complying by them would mean a major burden on citizens which would mean a massive increase in inflation. This could severely hurt the Imran Khan-led government and its political support.
“A steep monetary adjustment and fiscal realignments were the key sticking points holding back a final outcome and the IMF had not changed its stance since October 2018,” said a source from the Ministry of Finance.
Dr Abdul Hafeez Sheikh, the recently appointed Finance Minister, is trying his best to reach a consensus before the stock market opens on Monday, a senior source from the Finance ministry said.
“These are really serious matters and they need a serious approach,” the source added.
Sources have said the IMF team’s travel plan has also been rescheduled.
“Most members of the visiting IMF team have already gone back. A final report has also been sent to the IMF headquarters by the IMF team while Pakistani delegation has sent its report to the Prime Minister office,” a source said.
If the above details are to be believed, then it can be easily understood that Pakistan may be left with no other option but to agree to the difficult terms. It is also evident that IMF’s stance with the Pakistani delegation was not friendly but aggressive.
“IMF wanted Pakistan to commit to an upfront adjustment plan along with deep-rooted and wide-ranging structural reforms to secure the bailout,” the source said.
The Imran Khan-led government is under severe pressure by the IMF as it falls into deeper economic turmoil, pushing citizens into severe stress by increasing electricity and gas rates.
The combined adjustment over the next two years is estimated to be about 3.5 per cent of the GDP including through energy sector circular debt capping plan.
Islamabad is also under pressure from the Financial Action Task Force (FATF), which has given Pakistan an action plan to comply by regarding counter terror financing and money laundering.
Pakistan is already in the grey list of the FATF and is trying to prevent itself from being slashed into the black list, which would be a massive blow to Pakistan’s economy.