Pakistan’s government is reportedly facing delays in securing a billion-dollar bailout program from the International Monetary Fund (IMF) due to differences in opinion on key issues. The government has accused the IMF of deliberately delaying relief to put pressure on the country’s failing economy, similar to the situation in 1998 when Pakistan conducted a nuclear test.
Despite the disagreements, the government hopes to achieve a staff-level agreement (SLA) by next week and has requested assistance from the US government in finalizing a deal. However, talks remain deadlocked, posing serious risks to Pakistan’s already-lowering credit rating.
One of the major sticking points in the negotiations is the IMF’s push for the government to increase electricity prices for consumers, which is deemed unjustifiable by some. There are also concerns over a deadline for exporters to bring their proceeds to the country immediately or face conversion at old exchange rates.
The IMF has rejected the government’s position on calculating the real positive interest rate by comparing its core inflation, calling for a large interest rate hike ahead of a possible SLA. The monetary policy committee meeting has been extended by two weeks in order to secure this.
Overall, the delay in relief from the IMF could further damage Pakistan’s already-struggling economy. The IMF estimates a financing gap of about $7 billion for the current fiscal year, and the state bank predicts exchange reserves will exceed $10 billion by the end of June, up from $3.1 billion.
