IMF deal: US wants Pakistan to ‘continue down the path of reforms’

US State Department Spokesperson Ned Price on Monday said Washington would like to see Pakistan “continue down the path of reform” – in a reference to Prime Minister Shehbaz Sharif’s request to International Monetary Fund (IMF) to relax the conditions.

Answering a question about Pakistan’s demand at the donors’ conference in Geneva that the IMF should soften its stance and the related restructuring of its bailout programme during a press briefing, Price said the IMF would ultimately decide about relaxing the terms.

“We of course want to see Pakistan continue down the path of reform. We want to be a partner,” said Price.

The US will continue to be a partner to Pakistan when it comes to all of their priorities, whether it is security, whether it’s economic, or humanitarian, he added.

Price said since last year’s devastating floods in the South Asian nation, the US government had worked closely with the country to provide funding assistance for flood response, food security, disaster preparedness, and capacity-building efforts.

“I am pleased to share that today the United States announced an additional $100 million of recovery and reconstruction funding, bringing our total contribution to over $200 million.”

The new $100 million in funding, the spokesperson added, would be used for flood protection and governance, disease surveillance, economic growth and clean energy, climate-smart agriculture, food security, and infrastructure reconstruction.

It also included humanitarian assistance to support flood relief and recovery efforts in refugee-hosting areas, he said.

“Our flood-related assistance complements our broader efforts to form a US-Pakistan Green Alliance that looks at the range of climate and resilience issues central to Pakistan’s reconstruction. Pakistan’s recovery and reconstruction will be a continuing process in the months and years ahead, and we will continue to support Pakistan in its efforts to build a more climate-resilient future for its people.”

What did Shehbaz say at Geneva?

The US response came after Prime Minister Shehbaz Sharif asked the world’s top lender for a pause in its demands for implementing the conditions before releasing more financial aid.

The call came as the country received over $10 billion in pledges at the ‘International Conference on Climate Resilient Pakistan’, hosted jointly by Pakistan and the United Nations.

Speaking to reporters on Monday, Shehbaz said he was trying to persuade the IMF to give Islamabad some breathing space as it tackles the “nightmarish” situation.

The global lender wants Pakistan to withdraw remaining subsidies on petroleum products and electricity, aimed at helping the masses. “Even before these floods hit Pakistan, we were already facing humongous challenges,” he said.

“Yet we had to again connect with the IMF and resurrect an agreement which was violated by the previous government — and accept even harsher conditionalities,” Shehbaz said.

He said Pakistan was complying with the IMF’s conditions “as best as possible” but asked “how on earth” the additional burdens could be shouldered by the country’s poorest.

“Yet, we are committed to IMF’s programme. We will do everything to comply with the terms and conditions. Though I am constantly trying to persuade them: please give us a pause,” he said.

The prime minister had earlier also spoke with IMF Managing Director Kristalina Georgieva on Saturday and asked her to “kindly be considerate and compassionate and give us some breathing space”.

“This is an ongoing dialogue. I’m sure one day soon we will be able to convince them thro­u­gh logic and through facts. That said, regardless, we will comply with the IMF programme.”

Earlier, Shehbaz told the conference his country was “racing against time” to deal with towering needs. “I am asking for a sustained international support plan. I am asking for a new lifeline,” he said.

He added the flooding immediately affected 33 million people, destroyed more than 2 million homes and damaged over 8,000km of roads and 3,100km of railway track.

Strong greenback bad news for the world

The US dollar is the world’s dominant currency and plays a key role in global trade but its dominance means a plethora of problems for other nations, especially the poor countries and emerging markets.

And right now, the Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.

Prasad, who is an economist at the Brookings Institution and professor at Cornell University, says, “This is ultimately going to entrench the dollar’s dominance even further,” Prasad said. “That is certainly a serious problem for low-income countries that have high levels of foreign debt, especially dollar-denominated debt.”

“For the rest of the world, it’s a no-win situation,” he said a fragile currency can sometimes work as a buffering mechanism, causing nations to import less and export more. But today, many are not seeing the benefits of stronger growth.

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