ISLAMABAD: Pakistani Finance Minister Miftah Ismail said on Thursday the government could not fulfil all conditions imposed by the International Monetary Fund (IMF) for the revival of a $6 billion loan program that the South Asian country desperately needs to tackle a widening current account deficit and shore up dwindling foreign exchange reserves.
Pakistan and IMF agreed to a three-year $6 billion loan program in 2019. Pakistan, wary of surging inflation, is struggling to implement tough policy commitments including removing subsidies on its oil and power sectors.
Last week, seventh review talks on the loan scheme failed to achieve a breakthrough as the Fund pushed Pakistan to roll back the subsidies. Pakistan has since increased the prices of petroleum twice.
During a news conference, Ismail said Pakistan expected to reach a staff-level agreement with the IMF this month and would implement reforms suggested by the Fund when it released the fiscal budget next week.
“We’re talking to the IMF on a daily basis,” Ismail said during a news conference. “Sometimes the talks are positive, other times they are not, if I speak honestly, because we can’t accept all of their conditions. Some, we have to."
“For example, I won’t impose taxes [on petroleum products] in June but these subsidies [on oil and power[ have to go, I won’t lie to you about that,” he said.
Ismail said petrol subsidies were costing the government Rs120 billion per month while the cost of running the entire government was Rs40 billion.
“How can we give subsidies? Do you want me to bankrupt the government? God forbid, do you want me to take the country towards default? What other options do I have?”
The minister said he had urged the IMF to enhance Pakistan’s loan program by $2 billion and extend its tenure as Pakistan would next year be repaying instalments of the loans it had previously taken from the Fund.
“How is it possible for us to repay the IMF with instalments next year, when it is not giving us the tranche and we are not in the IMF’s program?” he asked. “Hence, it is almost necessary for them to extend the program, but let’s see what happens.”
Last month Pakistan's foreign minister had said the ongoing bailout deal with the IMF was "outdated" given a number of global crises.
"This IMF deal is not based on ground realities, and the context has absolutely changed from the time that this deal was negotiated," Bilawal Bhutto Zardari told Reuters on the sidelines of the World Economic Forum in Davos, Switzerland.
"This deal is a pre-COVID deal. It is a pre-Afghanistan fallout deal. It is a pre-Ukrainian crisis deal. It is a pre-inflation deal," Bhutto Zardari said
Terming the deal "outdated," he said it would be unfair and unrealistic to expect a developing country like Pakistan to navigate geopolitical issues under the current agreements.
