The International Monetary Fund (IMF) wrapped up a week of talks with Pakistan in Doha without saying if it would revive the stalled $6 billion bailout.
Pakistan went to the IMF in 2019 but has struggled to meet the lender’s conditions. One of the most painful ones is cutting the petrol and energy subsidies because of the devastating political price to pay. It does not help that Imran Khan was removed as prime minister, opening up another chapter of political turmoil. The new government, led by Shehbaz Sharif dithered on taking hard political decisions to satisfy the IMF. Imran Khan’s government had gone to the IMF in the first place, but he could not handle the economy and a crisis unfolded on his watch.
Pakistan had hoped to get $900 million this time around as it has only enough dollars in the bank to pay for two months of imports. Fuel and petrol subsidies are costing it billions it cannot pay. If the IMF had agreed to this fresh tranche Pakistan would have been able to access other funding as well.
And so, the IMF said Pakistan had not followed policies they had agreed to at the last review. This was reflected in the government’s announcement in February that fuel and power subsidies would continue. The IMF had wanted to see concrete action and these subsidies removed in the FY2023 budget, to achieve the bailout’s goals.
“The mission has held highly constructive discussions with the Pakistani authorities aimed at reaching an agreement on policies and reforms that would lead to the conclusion of the pending seventh review of the authorities’ reform program, which is supported by an IMF EFF arrangement,” said the IMF in its statement at the conclusion of talks.
“Considerable progress was made during the mission, including on the need to continue to address high inflation and the elevated fiscal and current account deficits, while ensuring adequate protection for the most vulnerable. In this regard, the further increase in policy rates implemented on May 23 was a welcome step.
The IMF said that its team looks forward to continuing its dialogue and close engagement with Pakistan’s government on policies to ensure macroeconomic stability for the benefit all of Pakistan’s citizens.
The IMF held both in-person and virtual discussions in Doha, Qatar with the Pakistani authorities during May 18 and 25 on policies to secure macroeconomic stability and support sustainable growth in Pakistan.