Pakistan in more trouble as IMF imposes new condition for financial bailout

Islamabad: The already crisis-hit Pakistan economy is in for more problems as the International Monetary Fund (IMF) has imposed yet another condition for a crucial financial bailout.

News agency Reuters quoted the IMF’s resident representative as saying that the global financial body has told Pakistan to give an assurance that its balance of payments deficit is fully financed for the financial year ending in June.

According to the IMF, this condition must be fulfilled if Pakistan is to restart the stalled IMF programme and unlock the next tranche of much-needed funding.

The potential financial bailout by the IMF is critical for the Pakistan economy, which is battling a crisis over balance of payments. In recent days, foreign exchange reserves in the State Bank of Pakistan have dropped to a critically low level which is just enough to cover four weeks of imports.

The critically low foreign exchange reserves have forced the Pakistan government to suspend most imports except essential items such as food and medicines.

IMF sets tough conditions for Pakistan

The IMF has been negotiating with the Pakistan government since early February in order to clear its ninth review. If the review is approved by the IMF board, the global financial institution will release $1.1 billion for Pakistan, which is part of a $6.5 billion bailout agreement. This IMF bailout will end at the close of the current financial year, which concludes on June 30.

Pakistan Finance Minister Ishaq Dar had claimed last week that an assurance over external financing was not included in the list of conditions laid down by the IMF.

“All IMF program reviews require firm and credible assurances that there is sufficient financing to ensure that the borrowing member’s balance of payments is fully financed … over the remainder of the program,” IMF official Esther Perez Ruiz was quoted as saying by Reuters.

According to media reports, Pakistan has completed several of the IMF conditions except for the one related to external financing. In its quest for the IMF bailout, the Pakistan government has come up with several measures such as hiking policy interest rates, reducing government expenses and increasing rates of fuel and electricity.

Pakistan’s finance ministry had also informed that the Industrial and Commercial Bank of China Ltd (ICBC) is set to forward a loan of $1.3 billion over the next few days. This loan fund will help to shore up the country’s foreign exchange reserves amidst the Pakistan economic crisis.