Pakistan faces default by October without IMF bailout, says former finance minister

Miftah Ismail says IMF programme is "essential" for Pakistan if it is to avoid default

By Tanveer Malik
May 27, 2023

KARACHI: Pakistan faces default by October this year without a bailout from the International Monetary Fund (IMF), former finance minister Miftah Ismail said on Thursday.


Ismail, who was finance minister from September to October last year, said the delay in the IMF programme had pushed the country's economy into "current troubles". "It is clear that Pakistan would default without an IMF programme in the last quarter of this financial year, if not by the end of this fiscal year," Ismail told members of the Council of Economic & Energy Journalists (CEEJ).

Ismail said that the IMF programme is "essential" for Pakistan if it is to avoid default. Pakistan is currently grappling with a severe balance of payment crisis, with its foreign exchange reserves dwindling to a meager four weeks' worth of controlled imports.

The release of $1.1 billion under the approved bailout programme has been delayed since November, and a staff-level agreement has yet to be reached. The programme is scheduled to expire in June, just before the budget for the next fiscal year.

Moreover, alternative sources of financing for the country are scarce. Though Finance Minister Ishaq Dar earlier this month said the country would meet its debt obligations until December of this year and avoid defaulting, regardless of whether the IMF bailout program is revived.

Dar also criticised the delay in finalising a Staff Level Agreement (SLA) with the IMF, stating that it should have been concluded "long ago." It has been over 100 days since the last IMF staff level mission to Pakistan, and no preliminary deal has been reached, marking the longest gap of its kind since 2008.

The pending $1.1 billion tranche is part of a $6.5 billion bailout package approved by the IMF in 2019. To date, Pakistan has received $3.9 billion. The former finance minister Ismail spoke out on a range of issues, including his departure from the ministry last year, the country's economic challenges, and the IMF bailout program.

Ismail, who was appointed finance minister in September 2021, was removed from the post in April 2022. The former finance minister also spoke about the country's economic challenges, saying Pakistan is facing a "gigantic task" in resolving its elite-captured economic problems.

Ismail, who is a member of the Pakistan Muslim League-Nawaz (PML-N) party, also said he was not interested in joining any new political party. "This is all speculation. I would be joining Shahid Khaqan Abbasi wherever he goes," he said, referring to the former prime minister.