The government will have to accept “beyond imagination” International Monetary Fund (IMF) bailout requirements, according to Pakistan’s Prime Minister (PM) Shehbaz Sharif, who made the statement on Friday in a meeting of civil and military leaders in the northwestern city of Peshawar.
In order to avoid backlash before the upcoming elections in October, the administration has refused to implement the tax increases and subsidy reductions that the IMF has required.
“I will not go into the details but will only say that our economic challenge is unimaginable. The conditions we will have to agree to with the IMF are beyond imagination. But we will have to agree with the conditions,” PM Shehbaz said.
In the midst of political unrest, a deteriorating security situation, and a balance of payments crisis caused by its high levels of foreign debt, Pakistan’s economy is in terrible circumstances.
The nation’s central bank announced Thursday that its foreign exchange holdings had decreased once again to $3.1 billion, which analysts said was just enough to cover imports for fewer than three weeks.
On Wednesday, year-over-year inflation reached a 48-year high, making it difficult for Pakistanis to afford food products.
With the possibility of national bankruptcy looming and no friendly countries prepared to give less painful bailouts, Islamabad started to submit to pressure ahead of the IMF visit.
To manage a rogue illicit market in US dollars, the government relaxed regulations on the rupee, which led to the currency falling to historic lows. Additionally, artificially low gasoline costs have increased.
A backlog of thousands of cargo containers filled with material the countrycannot afford is accumulating at Karachi port as a result of the government no longer providing letters of credit, with the exception of necessary food and medication.
IMF advises Pakistan to fetch additional revenue
The IMF has suggested the Pakistani government implement significant, high-quality, and long-lasting tax and non-tax revenue initiatives in order to raise extra funds to close the anticipated Rs. 600 billion fiscal framework shortfall.
Currently in Pakistan, an IMF delegation led by Mission Chief Nathan Porter is having discussions for the ninth review, which will go through February 9.
After months of resistance, the government was finally obliged to agree to all the terms laid forth by the Washington-based lender due to the country’s declining foreign exchange reserves and deteriorating economic circumstances.
Following the conclusion of the negotiations under the $6.5 billion Extended Fund Facility, a staff-level agreement is anticipated.
