Premature to say IMF talks have failed

ISLAMABAD: Pakistan has accepted most of the new conditions of the International Monetary Fund's (IMF)and any reports that talks have failed are "premature" at this stage, sources within the Ministry of Finance said on Saturday.

The sources said Pakistan will have to ensure the implementation of a privatization programme to secure the IMF loan programme. According to the sources, Pakistan will have to comply with the IMF's new conditions if it wanted the loan programme to be restored.

“The IMF suggested that we review our economic targets and comply with conditions related to the power sector reforms,” they said. The government will have to take measures to increase tax revenue, the sources said, adding that the IMF has rejected the ministry’s plan and imposed conditions that would see an increase in interest rates and fixing the market rate of the dollar.

The IMF board will make the final announcement regarding the loan program, according to the ministry's spokesperson. When inquired why there was a deadlock despite claims made by Pakistan’s economic team that “they were very close” to an agreement, sources said that in the aftermath of the last budget for 2021-22 and increased international prices, all macroeconomic targets became irrelevant, so massive adjustments were required on the fiscal, monetary and exchange rate fronts.

At the twilight of the government's tenure, when one-and-a-half years are left till the completion of its five-year period, the government has found it difficult to make massive adjustments on all economic fronts. The IMF wants progress on the privatization front in order to sell out loss-making entities such as PIA and Pakistan Steel Mills. The Fund also wants the power sector viable and wants to see Discos privatised.

Without the IMF program, if the foreign currency reserves start depleting, it would be difficult to control the dollarisation of the economy. With POL prices crossing $84 per barrel, inflationary pressures are bound to increase further.

The PTI-led government plans to announce a massive subsidy program, but it remains to be seen how it will be funded.