Strange coincidence?: PDM, caretaker, next govt get one IMF tranche each

ISLAMABAD: The $3 billion IMF Standby Arrangement (SBA) has been co-incidentally so designed that each government during its tenure of transition is supposed to get one tranche.

Initially, the IMF had proposed an SBA programme of 15 months for Pakistan’s struggling economy. Later, the program period of 12 months came under discussion but finally both sides agreed to a nine-month program from July 2023 through March 2024 during the PDM govt’s tenure.

This debate was triggered again as the IMF’s mission arrived in Pakistan and then the Election Commission of Pakistan (ECP) announced the exact schedule for holding the next general elections on February 8, 2024. This reporter contacted former minister for finance Ishaq Dar to inquire whether the IMF program of $3 billion was supposed to provide one tranche each to the PDM-led government, the caretaker government and the upcoming government through a well-thought-out strategy. Dar replied that it was coincidental as he always wanted that a medium-term program should be the prerogative of the elected government.

He said when the SBA agreement was struck, no one knew that the elections would be held in seven months instead of 90 days.

He reminded that at the time of the signing of IMF program, it was not known that the population census would be completed and then endorsed by the constitutional forum that bound the ECP for undertaking the delimitation exercise.

Dar said initially the IMF program was designed for 15 months but he opposed it and negotiated that it should be completed within months. He said he had always asked the IMF to provide a $1.2 billion installment upfront to Islamabad, which was delayed without any valid economic reasons for several months by not completing the pending reviews from November 2022 to June 2023. He said it was part of the global agenda to keep Pakistan on its knees but they had prepared a Plan B to save the country from default.

He said under the last EFF program, Pakistan was looking for $2.5 billion but he had demanded $3.5 billion under the SBA program. After holding tough negotiations, the size of the SBA program was finalized at $3 billion.

He was of the view that the existing program should end within the stipulated timeframe and predicted that the second review might get delayed for a couple of weeks as it was planned to kick-start from February 2, 2024, but due to the elections timeframe, it might be delayed for a couple of weeks.

On the other hand, the IMF, after approving the $3 billion program for Pakistan, stated that to preserve economic stability, the (Pak) authorities had requested for a new SBA to support their renewed policy efforts. Authorities believe that the new program can play a crucial role in anchoring policies ahead of the national elections due in the Fall and until a new government is formed.

The new program will build on Pakistan’s recent EFF-supported program and help address its BOP needs by supporting the needed adjustment, bolstering confidence, and catalyzing multilateral and bilateral financing.

Notwithstanding the increasing polarization and tensions between the main political parties, there is a broad recognition that Pakistan needs to remain engaged with the Fund and other international partners and that strong policies should be sustained even after the SBA expires in April 2024.

For political assurances, the IMF says their staff has met with the representatives of Pakistan’s major political parties — Pakistan Muslim League-Nawaz, Pakistan Peoples Party, and Pakistan Tehreek-e-Insaf — and has explained the objectives and key policies of the proposed SBA. All these parties expressed written support for the SBA’s key objectives and policies ahead of the approaching national elections.

They also recognized the role that the SBA will play in preserving macroeconomic stability by anchoring policies and supporting external financing over the coming months.