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Pakistan to get $6 billion from IMF over the next three years
ISLAMABAD, May 13, 2019 (BSS/AFP) – Pakistan and the IMF have reached a
new agreement securing a $6 billion bailout for the cash-strapped country,
officials said Sunday, following months of painstaking negotiations between
the two sides.
The agreement marks Pakistan’s 22nd bailout with the Fund, as the country
struggles to stave off a looming balance-of-payments crisis while its economy
teeters due to low growth, soaring inflation, and mounting debt.
“The programme aims to support the authorities’ strategy for stronger and
more balanced growth by reducing domestic and external imbalances, improving
the business environment, strengthening institutions, increasing
transparency, and protecting social spending,” said Ramirez Rigo, head of the
IMF delegation, in a statement released late Sunday.
According to Pakistan’s finance advisor Abdul Hafeez Sheikh the country is
set to receive $6 billion from the IMF in addition to $2 to $3 billion from
the World Bank and Asian Development Bank over the next three years.
“We have a $12 billion gap in our annual payments and we don’t have the
capacity to pay them,” Sheik said in a televised address as he announced the
new agreement with the fund.
Analysts have warned that any fresh IMF deal would likely come with myriad
restrictions that could hobble Prime Minister Imran Khan’s grand promises to
build an Islamic welfare state, as the country is forced to tighten its purse
strings.
– Battered economy –
The deal with the IMF comes weeks after Sheikh — a former World Bank
official who was Pakistan’s finance minister from 2010-2013 — was appointed
as “adviser on finance” after Finance Minister Asad Umar resigned amid a
wide-ranging cabin reshuffle.
The abrupt resignation of Umar — one of Khan’s most powerful ministers —
was particularly shocking due to his perceived role in overseeing the vital
negotiations with the IMF over the long-delayed bailout.
The announcement comes as discontent is already growing over measures
Khan’s government has taken to fend off the crisis, including devaluing the
rupee by some 30 percent since January 2018, sending inflation to five-year
highs.
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A government report published Friday also noted that Pakistan’s growth
rate is set to hit an eight-year low, with the country’s GDP rate likely to
sink to 3.3 percent against a projected target of 6.2 percent.
Pakistan has had 21 bailouts since it joined the IMF in 1950. Its most
recent loan was issued in 2013, worth $6.6 billion.
The United Arab Emirates — Pakistan’s largest trading partner in the
Middle East and a major investment source — recently offered $3 billion to
support the battered economy.
Islamabad also secured $6 billion in funding from Saudi Arabia and struck
a 12-month deal for a cash lifeline during Khan’s visit to the kingdom in
October.
However the influx of Gulf cash failed to reverse the economic headwinds
battering Pakistan, as high fuel prices, low tax yields, and rising inflation
have kept the country off balance.
The crisis also comes as Pakistan is facing possible sanctions from the
Financial Action Task Force — an anti money-laundering monitor based in
Paris — for failing to rein in terror financing.
The organisation will soon decide whether to add Pakistan to a blacklist
that would trigger automatic sanctions, further weakening Pakistan’s already
faltering economy.
To add to its woes, the United States has also warned that it will be
watching closely to ensure Pakistan does not use IMF money to repay debts to
China, which has poured billions into the country for infrastructure projects
under its Belt and Road Initiative.
US President Donald Trump has already proven to show little sympathy for
Pakistan, after last year cutting $300 million in military aid that had been
flowing over logistical assistance to US forces in Afghanistan.
BSS/AFP/HR/0955