Pakistan News

IMF Agreement Is Not A “Magic Cure,” Claims Shehbaz

IMF Agreement Is Not A “Magic Cure,” Claims Shehbaz

July 2, 2023 / By Zunair Tahir / Pakistan News


Prime Minister Shehbaz Sharif stated that the current arrangement is not a panacea and that he hopes it would “be the last one” shortly after the government received a much-needed $3 billion short-term financing package from the IMF.

A Friday IMF accord was set to expire only hours before the new nine-month standby agreement was announced. Now, the IMF’s board must approve the staff-level agreement with Pakistan later this month.

Although the accord provided a “much-needed breather,” Prime Minister Sharif stated he hoped this new program would be “the last one.”

  • Hours before the last package’s expiration, a nine-month standby agreement is announced;
  • The IMF board must approve a $3 billion package later this month.
  • Despite his insistence that loans do not build nations, the PM calls the current agreement a “much-needed breather.”

“This is not a time for arrogance, but rather for reflection on reality. Do countries manage without loans? Let’s pray that this is the last time we obtain a loan from the IMF and that we won’t need to do so in the future, he said to the media in Lahore on Friday after the agreement was reached.

The conversations he had last week in Paris with IMF Managing Director Kristalina Georgieva were characterized by him as a “turning point” in a string of recent negotiations with the international organization.

As it struggles to pay off debilitating external debt, the economy is experiencing a balance of payments crisis, and months of political unrest have discouraged foreign investment.

The country is struggling to afford imports as a result of skyrocketing inflation, the rupee’s record low against the dollar, and a country-wide decrease in industrial production.

“I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month standby arrangement in the amount of SDR 2,250 million (about $3bn),” IMF mission leader Nathan Porter said in a statement late Thursday.

According to Mr. Porter, the agreement will be evaluated by the IMF executive board by mid-July.

Since last November, the administration has been trying to satisfy the terms of the bailout arrangement by making hurried modifications to the national budget. According to Mr. Porter, it ended on Friday, and the new pact builds on the IMF’s initiatives under the earlier accord.

A $1.1 billion advance payment would be made under the revised agreement, according to Finance Minister Ishaq Dar, immediately after the IMF board meeting this month.

The agreement will also make other finance available on a bilateral and international basis. Saudi Arabia, the UAE, and China, longtime friends, have already committed or extended billions in credit. The IMF stated that this “will support near-term policy efforts and replenish gross reserves.”

According to Tradeweb statistics reported by Reuters, Pakistan’s sovereign dollar bonds were trading higher after the announcement, with the 2024 issue seeing the greatest gains, up more than 8 cents at little above 70 cents in the dollar.

Shorter-dated bonds had the biggest increases, showing ongoing doubts about the nation’s longer-term budgetary picture.

Later, on Friday night, PM Shehbaz tweeted that the new IMF agreement was a “much-needed breather” that will aid the nation in achieving economic stability. He stressed, nevertheless, that “loans are not used to build states. I ask God that this new program will be the last.

Miftah Ismail, a former finance minister, wrote in a tweet, “We must acknowledge that this IMF accord affords us yet another opportunity to make significant reforms. The people of Pakistan will continue to suffer for the structural and governance failings of their governments if we don’t implement these changes, leaving Pakistan at the mercy of multilateral lenders.

Pakistan’s poor progress in fulfilling the conditions set forth by the IMF for an agreement has drawn criticism from Michael Kugelman, head of the South Asia Institute at the Wilson Centre.

He stated that Islamabad has postponed politically hazardous fiscal policy actions that the IMF had been hoping to see for months.


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Pakistan News

PM Says That All Conditions Have Been Fulfilled, But IMF Wants “More Guarantees”

PM Says That All Conditions Have Been Fulfilled, But IMF Wants “More Guarantees”

April 16, 2023 / By Zunair Tahir / Pakistan News


The International Monetary Fund (IMF) has no reason to put off approving the staff-level agreement after receiving financial guarantees from allies, according to Prime Minister Shehbaz Sharif on Saturday. However, a Fund official said the lender was looking forward to receiving “necessary financing assurances” as soon as possible to clear the way for the conclusion of the ninth review of the $7 billion program.

IMF Mission Chief to Pakistan Nathan Porter made the announcement a day after Finance Minister Ishaq Dar confirmed $1 billion in bilateral financial help for Pakistan, which is thought to be the last preparatory action for staff-level agreement with the international lender.

PM Shehbaz remarked, “The IMF had set a condition for us to arrange funds from friendly countries before it signed a staff-level agreement with us,” while speaking at an event in Lahore. We worked hard for one and a half months to achieve the IMF’s final need by first getting a rollover of $2 billion from China and then $3 billion from Saudi Arabia and the UAE.

The premier complimented Bilawal Bhutto-Zardari and Ishaq Dar for their “hard work” in this respect and stated that “the new army chief made efforts to acquire the funds from Saudi Arabia and the UAE.”

He expressed the resolve to overcome these obstacles by reaching an agreement with the international lender as quickly as possible, despite the fact that his administration “inherited an IMF agreement that was in tatters.” There was “no alternative,” he said, therefore the government had to accept the strict requirements established by the IMF.

The Fund, meantime, praised Pakistan’s receipt of bilateral aid but pressed Islamabad for more guarantees to finalise the agreement.

The agreement to retain strong policies and find adequate funding to assist the implementation efforts was reached during talks between the Pakistani delegation and IMF employees and management, the statement added.

In contrast to an earlier government declaration that the pledge of $2 billion from Saudi Arabia and $1 billion from the UAE would address the issue, an official source noted that the Fund is still waiting for assurances from friendly nations. In addition, Mr. Dar said that the State Bank had received the final payment of $300 million from the Industrial and Commercial Bank of China on its $1.3 billion loan.

Kristalina Georgieva, the chief of the IMF, had hoped Pakistan would finish its current plan.

At a news conference in Washington, she stated, “My hope is that with the goodwill of everyone and with the implementation of what has already been agreed upon by the Pakistani authorities, we can complete our current program successfully.”

Separately, as part of the IMF/World Bank spring meetings, Mr. Dar conducted a virtual discussion with Jin Liqu, the president of the Asian Infrastructure and Investment Bank (AIIB), through a video link.

According to a formal statement, Mr. Dar informed the AIIB president on the government’s economic objectives and reforms for sustainable development while also sharing the present economic prognosis.

According to the release, the AIIB president praised the bank’s partnership with Pakistan.


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