Pakistan needs additional financing for a successful bailout, IMF says
1 min read . Updated: 12 May 2023, 12:01 PM IST
PremiumIMF Urges Pakistan to secure additional financing for bailout package approval
IMF in a press conference on Thursday said,"Pakistan needs significant additional financing for a successful completion of the long-stalled ninth review of the International Monetary Fund's bailout package."
For Pakistan to resolve an acute balance of payments crisis, IMF demanded commitments of “significant additional financing" before approving the release of pending bailout funds . A staff-level accord to release a $1.1 billion tranche out of a $6.5 billion IMF package has been delayed since November. Nearly 100 days have gone since the last staff-level mission to Pakistan, which is the longest such gap since at least 2008.
However, IMF spokeswoman, Julie Kozack confirmed that financing already committed by Pakistan's external partners was welcomed.
In March and April, UAE, Saudi Arabia and China came to Pakistan's financial support with pledges to cover some of the deficit. Pakistan's central bank reserves fell from $74 mln to $4.38 billion on Thursday, barely a month's worth of imports.
"Our team is very heavily engaged of course with the Pakistani authorities, because Pakistan indeed faces a very challenging situation," said Kozack. She added that the economy was facing stagflation, has very large financing needs and has also been affected by a series of shocks including severe floods.
Dropped cross-subsidy programme
Prime Minister Shehbaz Sharif, in March, had proposed charging well-to-do consumers more for fuel, with the money raised used to subsidise prices for the poor who have been hit hard by inflation.
One of the key reasons for the delay in implementing the IMF bailout was this proposed scheme.
An IMF representative said, “Pakistan has committed not to implement a cross-subsidy programme." The government will not introduce new tax exemptions and will 'durably allow' a market-based exchange rate for the rupee currency, the IMF official said on Thursday.