Pak begins talks with IMF to resurrect enhanced bailout package to support its sagging economy

Talks between Pakistan and the International Monetary Fund began on Wednesday to resurrect an enhanced bailout package to support the sagging economy of the cash-strapped country.

Pakistan has repeatedly been seeking international aid to support its failing economy.

The talks are being held in the Qatari capital Doha, the finance ministry tweeted. The negotiations are expected to continue into next week, it said.

Finance Minister Miftah Ismail, Minister of State Aisha Ghous Pasha, Finance Secretary Hamed Yaqoob Shaikh, State Bank of Pakistan (SBP) Acting Governor Murtaza Syed, Federal Board of Revenue (FBR) Chairman Asim Ahmad and other senior officials from the finance division are participating in the talks taking place virtually.

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Ismail who travelled to Washington last month and met with the Fund officials, said that the effort was not just to revive the USD 6 billion IMF bailout package signed by former prime minister Imran Khan in 2019 but also to add another USD 2 billion to it.

The 2019 agreement has never been fully implemented due to the failure of Khan’s government to fulfil its commitments made with the fund, which so far has released only USD 3 billion under the agreed programme.

Ismail said he had also requested the global lender to extend the programme for one year till June 2023. Pakistan would also try to secure the release of the next tranche of USD 1 billion before the end of this financial year on June 30.

Among other issues, financial support from the US would also be part of the talks, sources said.

In another development, Pakistan’s business community has urged the government to immediately put curbs on the import of luxury goods as the country is heading towards economic chaos.

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“Pakistan is heading towards an economic crisis,” warned Employers’ Federation of Pakistan (EFP) President Ismail Suttar.

Worsening balance of payments position, high inflation, depleting foreign exchange reserves and political uncertainty had led the country to an alarming economic situation, Suttar was quoted as saying by The news Tribune newspaper.

“It is devastating that Pakistan has been consistently facing a trade deficit since 2003,” he said, adding that immediate action and implementation of strict policies to control the situation is the need of the hour.

Pakistan definitely needs to curb non-essential imports, AL Habib Capital Markets Head of Research Fawad Basir emphasised. “It will help to a certain extent but this should be the starting point,” he said.

However, some experts are of the view that avoiding imports would be very difficult for Pakistan.

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Pakistan Business Council (PBC) Chief Executive Officer Ehsan Malik underlined that most of the “imports are unavoidable at least in the short run such as fuel, food, machinery, chemicals and medicines”.

“Others are materials necessary for domestic manufacturing and exports, like cotton and man-made fibres,” he said. “That leaves a small portion of around 5% where import restrictions can work without hurting the economy.” That portion included mobile phones and vehicles in completely built-up form, Malik said, adding that dry fruits and pet food were also included.

The curbs could range from high duty to an outright ban, he said. “High duty will have limited effect as demand for these items is not elastic and will not diminish even with high rates of duty,” he pointed out.

AHL Head of Research Tahir Abbas said the country needs to impose a financial emergency to curb non-essential imports, particularly luxury goods, to save foreign exchange reserves.

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