ISLAMABAD:
The Pakistan Tehreek-e-Insaf’s (PTI) attempt to block the next multi-billion-dollar bailout package backfired on Friday after the International Monetary Fund (IMF) refused to interfere in Pakistan’s politics but encouraged the country to hold fair resolution of all electrical disputes.
PTI founder Imran Khan had penned a letter to the IMF, urging the global lender to give the poll results a thorough once-over before cutting any new cheques for Islamabad.
“If the country gets a loan in such a situation, then who will return it?” he questioned, expressing concerns that such a loan could lead to an increase in poverty.
The former prime minister warned that without substantial investment in the country, the burden of loans would continue to rise, underscoring the need for political stability.
While breaking its silence on the PTI’s attempt to involve the global lender in political matters, a spokesperson of the IMF instead showed readiness to negotiate the next medium-term programme with the newly-elected government.
Read: Imran’s letter to IMF akin to hostility towards state, says Nawaz
“The IMF, as an international institution with a narrow mandate on economic issues, does not comment on domestic political developments,” said the IMF spokesperson while commenting on the letter written by the PTI.
The IMF said that it received a letter from a PTI spokesperson on February 28 regarding the Fund’s engagement with Pakistan under the programme.
The PTI is disputing the February 8th election results and is claiming to have won about 177 seats as against 92, which were notified by the Election Commission of Pakistan (ECP) as independently elected members of the National Assembly. The PTI has also claimed to have documentary evidence of rigging in the elections and demanded that the IMF should play a role in conducting the investigations.
“Given the importance of the institutional environment for economic stability and growth, we do encourage the fair and peaceful resolution of all electoral disputes,” said the IMF spokesperson.
The PTI’s decision to write the letter to the IMF was also against the party’s vocal opposition to the involvement of any foreign player in Pakistan’s political matters.
The attempt to involve the IMF in domestic political affairs had also given credence to the apprehensions that former prime minister Imran Khan could go to any extent to win back the power that he had lost because of a vote of no confidence in April 2022.
The IMF’s current $3 billion short-term bailout package is expiring before the middle of next month and Prime Minister Shehbaz Sharif has already given a go-ahead to the Ministry of Finance to begin discussions for signing a new Extended Fund Facility (EFF).
The last EFF had expired in June without the disbursement of the $2.6 billion loan amount due to Pakistan’s failure to meet the programme conditions.
The last loan tranche of $1.2 billion of the current programme remains undisbursed and the IMF is waiting for the formation of the federal cabinet before sending a mission to Pakistan.
“We look forward to engaging with the new government to complete the second review under the current Stand-by Arrangement and, should the government request, support the formulation of a new medium-term economic programme,” according to the IMF spokesperson.
PM Shehbaz has not yet officially announced the new economic czar of Pakistan, although there has been an in-principle agreement to make Muhammad Aurangzeb the in-charge of the Finance Ministry.
Aurangzeb is not a Pakistani national. If he decides to surrender his foreign nationality, he would be made a senator from Punjab and the finance minister. In case he retains his foreign nationality, Aurangzeb would be the special assistant to the prime minister.
The IMF also laid out its priorities for future engagements with Pakistan, as the country remains dependent on international financial institutions to meet its annual $25 billion to $30 billion foreign financing needs for debt repayments and current account deficit financing.
The spokesperson said that the IMF’s aim is to support the implementation of strong policies to deepen financial stability, address long-standing economic and underlying balance of payments challenges, and restore sustained and inclusive growth for the benefit of all Pakistani citizens.
The spokesperson further elaborated that to achieve these objectives there is a need for Pakistan to ensure stronger public finances, through high-quality revenue measures to broaden the tax base while scaling up the support for the most vulnerable.
The IMF is again pushing Pakistan to increase the tax burden of the salaried and the business individuals by reducing the number of tax slabs – a move that would be highly counterproductive and could create unease among the salaried persons.
The federal government’s expenditure shot up 50% to Rs7.5 trillion during the first seven months of this fiscal year, mainly because of high interest rates that are now eating up nearly two-thirds of the total expenses.
The spokesperson also highlighted restoring energy sector viability, improving institutional governance and anti-corruption effectiveness, State-Owned Enterprises reforms, building climate resilience, and creating a level playing field for private businesses to promote investment and job creation as its other priorities.
Despite the involvement of the IMF and the World Bank, Pakistan has remained unable to resolve its energy sector issues due to long policy prescriptions. The fiscalization of the energy sector losses is not helping to zero the circular debt, which now stands close to Rs5.7 trillion for both gas and the power sectors.
The IMF had also included the anti-corruption theme in its last EFF programme but the global lender did not actively follow this agenda.