The IMF program for Pakistan is in trouble which is a major concern of the country. While it was relatively easy to agree at the staff level, securing the approval of the board of IMF has always remained a tough job. At first, the finance minister hoped that the board meeting would take place in August for the H share transaction. , but no meeting was planned and the schedule was shifted to early September instead. However, it now seems that Pakistan may not even be discussed at an IMF board meeting until at end of September or maybe even later.
The most significant concern that continues to contribute to a delay in achieving FTT is the gross financing gap. In this regard, the government has only been able to get pledges for mobilization of only $1. 2 billion to the rest while setting aside a great $3. 8 billion shortfalls. This gap comprises of $800 million in the first year for firm commitments and $ 3,000,000,000 for the subsequent years in soft commitments.
These delays are causing much uncertainty, especially with the foreign portfolio investors who have shifted from investing in government securities. The macroeconomic stability of the economy as affirmed by the finance minister is slowly being challenged while doubts arise over the status of the country’s economic growth rate.
Making this even worse is the frosty diplomatic relationship with China on debt re-profiling for Independent Power Producers (IPPs). In recent discussions, the Chinese officials raised issues with the government’s future agenda thus complicating the negotiations.
Pakistan thus directed efforts to obtain supplementary loans to cater for the financing gap and Saudi Arabia has committed to provide $1. 2 billion. Still, this is insufficient. IMF clearance is another big issue; commercial banks in UAE are also being wooed for funds but they reply that they need the IMF nod first – which has made it a standstill at the moment.
Every delay algorithm not only undermines confidence but also the rather frail stability that Pakistan requires to sustain itself economically. This demonstrates the high importance of adjusting current approaches and coming up with clear and well-coordinated steps.