With Pakistan in political turmoil, the country’s economic woes have multiplied. The International Monetary Fund’s $6 billion program has stalled, with no possibility of approving the next tranche in the current month, Pakistani daily The News reported.
Now, Pakistan will have to manage $5 billion as a bridge financing gap until June to avoid a full-fledged balance of payments crisis and manage the depletion of foreign exchange reserves in case the program continues to run. be suspended.
After the IMF program hit the roadblock, Pakistan’s other creditors like World Bank and Asian Development Bank stopped budget support and attached approval with IMF comfort letter, the website reported. .
Pakistani officials said there were only three options left, including negotiating a consensus on the memorandum of financial and economic policies, waiting for elections until July, then extending the IMF program beyond September. or abandon the existing program and negotiate a new agreement. with the IMF with the new government.
Nevertheless, Pakistan will have to manage $5 billion over the next few months to avoid a crisis-like situation. “A financing gap of $2 billion would emerge from the IMF as Islamabad considers external financing of the Fund through the approval of the seventh and eighth reviews under the $6 billion Extended Financing Facility (EFF). Pakistan will have to manage an additional $3 billion from bilateral donors to bridge the gaping funding gap,” a senior official told Pakistani media.
It is important to note that Pakistan and the IMF recently held talks for the completion of the pending 7th review and the release of a tranche of $960 million, which now seems impossible to accomplish this month. .
“The IMF seeks to continue its support to Pakistan and once a new government is formed, we will engage on policies to promote macroeconomic stability and learn about intentions vis-à-vis the engagement. program,” said IMF resident chief Esther Perez Ruiz. claiming that there were no plans to suspend the program.
But this is not the first time that Pakistan has faced such a challenge. Before the 2018 elections, the IMF announced in Pakistan that it would negotiate an agreement with the new government. Then-finance minister Shamshad Akhtar had to manage $2 billion from China to meet balance-of-payments terms.
According to The News, foreign currency reserves are shrinking and now stand at a paltry $12.04 billion as of March 25. The balance of payments crisis will knock on doors during the election if the current account deficit continues to worsen.