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Essential to remain under IMF programme: economic managers

Pakistan economic team feels itself in a catch-22 situation because of IMF's tough attitude

By Mehtab Haider
December 23, 2021
IMF logo
IMF logo

ISLAMABAD: Pakistan’s economic managers are all set to convey to the top political leadership of the country that Islamabad is left with no other option but to remain under the existing IMF program of $6 billion Extended Fund Facility (EFF) to avoid a full-fledged crisis on the economic front.

However, the economic team feels itself in a catch-22 situation because of the tough attitude of the IMF team. It was for the first time in the country’s history that Pakistani negotiators had to accept conditions in the shape of seeking approval of Parliament on two key bills, including Tax Laws (Fourth) Amendment Bill and SBP’s Autonomy Bill, instead of submission of bills before the parliament. It is simply hard to digest how the IMF could dictate a parliament of a sovereign country, experts asked.

But officials, who negotiated on behalf of the Government of Pakistan, said that Islamabad made a commitment to present the SBP’s Autonomy Bill before the parliament but when trust was breached, then the IMF imposed a condition to seek approval of the parliament as Prior Actions for placing Pakistan’s request for completion of the 6th Review and release of $1 billion tranche before the Fund’s Executive Board. The official sources conceded that it was a wrong strategy for negotiation with the IMF staff because of which now the negotiators had landed in a catch-22 situation. But they were clear on one point that there was no other way but to fulfill the IMF condition for reviving the stalled Fund program.

This scribe contacted Dr. Khaqan Najeeb, former Economic Adviser of Finance Ministry, on Wednesday. He said the IMF program completion is a matter of good negotiation, sound preparation, and deep data analysis. Any country should be able to suggest structural benchmarks, performance criteria and negotiate with them to the best of its advantage.

He said in the strict sense, legislative bills should be about submission to the parliament, getting a sovereign parliament debate, and passing them as the parliament deems fit. He explained Pakistan in successful negotiations has always been able to convince, whether in Disbursement Linked Indicators (DLI) programs, or other budgetary support, the country's sincerity of completing agreed benchmarks.

Dr. Khaqan stated that one way is to agree on a presidential ordinance for removing the exemptions, which can suffice till the removal of the exemptions is made a part of the Finance Bill FY2023. He was of the view, the country should complete ongoing multilateral programs, including the IMF program, so that uncertainties causing jitters in the three markets (PSX, money market and exchange rate) are settled. He concluded that this funding is essential to ensure that the financing requirement of about US$27 billion for FY2022 is successfully fulfilled.