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February 12, 2019

IMF: yes or no?


February 12, 2019

With the PTI government not able achieve a breakthrough with the IMF on the ongoing negotiations for a bailout package, Prime Minister Imran Khan took the unusual step of meeting IMF Managing Director Christine Lagarde at a high-level meeting in Dubai. One of the things to remember is that IMF negotiations do not – usually – happen between the head of the IMF and the Pakistani PM, but at the level of the finance ministry and the IMF bureaucracy. We had been hearing rumours and concerns about disagreements between the IMF and the PTI government, something Finance Minister Asad Umar did his best to downplay – especially when the IMF representatives in Pakistan took the extraordinary step of criticising the PTI’s second mini-budget publicly. The fact that the IMF tends to offer its analysis in formal reports, not press releases, made the press release on the mini-budget a sign that there was a significant departure between the government’s position and that of the IMF.

The trouble is that it is hard to understand where the departure lies. The government has done its best to show that it shares the same economic agenda for Pakistan as that envisioned by the IMF. More than that, the government also took a number of ‘structural reform’ measures, such as currency devaluation, raising interest rates, raising gas and electricity tariffs, before formal negotiations with the IMF even started. Given how much the government tried to show that it would consider the IMF agenda to be its own, the IMF seems to still not have been satisfied.

This could have been an opportunity for the government to quietly let the matter of the IMF bailout slip away as it continued its economic reforms agenda and pursued other channels to cover the funding shortfalls. Instead, PM Khan’s decision to meet Lagarde means that the government has now decided it needs the IMF basket – and would be left red-faced if a deal were not be signed soon. After the meeting, Lagarde merely reassured that the IMF is ready to support Pakistan, but this does not mean the two are any closer to a staff-level agreement. Both parties would like the next IMF mission to Pakistan to be a decisive one. This is why Khan has become the first prime minister to give the IMF direct assurances of the country’s desire to fulfil the conditions of the bailout. The trouble is the impression this leaves us with – and hence the severe criticism from the opposition parties regarding Khan’s decision to meet the IMF MD. One would hope that the ongoing confusion sorts itself at a time when informal sources in government are briefing the media that a ‘deal is close’ while the information minister talks about problems with the ‘conditions’ of the deal. Clarity is essential in the days ahead.

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