KARACHI: Pakistan’s government on Thursday remained locked in crunch talks with the IMF over the release of a crucial financial bailout on the last scheduled day of the global lender’s visit. An International Monetary Fund (IMF) delegation landed in Islamabad last week to thrash out tough conditions that Prime Minister Shehbaz Sharif called “beyond imagination”.
Pakistan’s economy is in dire straits, stricken by a balance of payments crisis as it attempts to service high levels of external debt amid political chaos and deteriorating security. “The IMF is clearly asking for much more than what the government is willing to do, even with a little bit of arm twisting,” said economic analyst Abid Hasan, a former adviser to the World Bank, in the capital Islamabad.
“Both sides are waiting for the other to blink.” Finance Minister Ishaq Dar told reporters on Thursday that “a final round of talks is going on”. The IMF wants a boost to the pitifully low tax base, an end to tax exemptions for the export sector, and further hikes to artificially low petrol, electricity and gas prices meant to help low-income families.
It is also pushing for Pakistan to keep a sustainable amount of US dollars in the bank through guarantees of further support from friendly nations Saudi Arabia, China and the UAE, as well as the World Bank. “There is no deadlock,” Pakistan Energy Minister Khurram Dastgir Khan told local media on Wednesday.”Detailed and vigorous discussions have been held in the past 10 days.” “I have full hope that these talks will be concluded successfully.”
Bowing to pressure
Years of financial mismanagement and political instability have damaged Pakistan’s economy-damage exacerbated by a global energy crisis and devastating floods that submerged a third of the country. With the prospect of national bankruptcy looming, Islamabad in recent weeks began to bow to pressure, prompting the IMF’s last-minute visit.
The government loosened controls on the rupee to rein in a rampant black market in US dollars-a step that caused the currency to plunge to a record low-and hiked petrol prices by 16 percent. A government official, who asked not be named, told AFP that the “IMF is not satisfied with the current prices of petroleum and energy”. Fears of a further price hike have seen hoarding in the country’s largest province of Punjab, pushing the state minister Musadik Malik to report that the government had “no plans to increase the fuel price”.
Meanwhile, struggling industries are battling for the government to unblock imports, with thousands of shipping containers held up at Karachi port. The steel industry has warned the government that unless scrap metal imports are restarted, there will be a cascading effect on employment. Pakistan had sketched out a $6.5 billion loan package with the IMF, which has so far paid out roughly half that amount. – AFP