No deal as IMF leaves crisis-hit Pakistan

WASHINGTON

After months of deadlock, the IMF arrived last week for last-ditch negotiations with a government fearing the political consequences of enforcing bailout conditions in an election year.

Pakistan’s economy is in dire straits, stricken by a balance-of-payments crisis as it attempts to service high levels of external debt amid political chaos and deteriorating security.
Inflation has rocketed, the rupee has plummeted and the country can no longer afford imports, causing a severe decline in industry.

“Considerable progress was made during the mission on policy measures to address domestic and external imbalances,” the IMF said in a statement.
“Virtual discussions will continue in the coming days to finalize the implementation details of these policies.”
Prime Minister Shehbaz Sharif previously called the conditions for the $1.2 billion loan instalment “beyond imagination.”
Finance Minister Ishaq Dar addressed the nation after the IMF team left the country on Feb. 10 morning, saying talks had “concluded successfully” and that a draft memorandum on broadly agreed policies had been shared by the lender with the government.

Economic analyst Abid Hasan, a former adviser to the World Bank, said “there will be disappointment in the business community.”
“The only way stability can be achieved is through a deal. This has heightened the uncertainty,” he told AFP in the capital Islamabad.
Analysts have warned that rejecting conditions and pushing Pakistan to the brink risks bankruptcy and default on external loan repayments.

The IMF wants the nuclear-armed nation to boost its pitifully low tax base, end tax exemptions for the export
sector, and raise artificially low petrol, electricity and gas prices meant to help low-income families.
It is also pushing for Pakistan to keep a sustainable amount of U.S. dollars in the bank through guarantees of further support from friendly nations Saudi Arabia, China and the UAE, as well as the World Bank.
On Feb. 9, the central bank released fresh data warning its forex reserves had plunged by $170 million in a week, standing at just $2.9 billion as of last week.

Since January, the world’s fifth most populous nation is no longer issuing letters of credit, except for essential food and medicine, causing a
backlog of shipping containers at a Karachi port stuffed with stock the country can no longer afford.
Industries have warned the logjam of cargo would increasingly cause factories to shut, having a cascading effect on employment.
After months of holding out, the government began to bow to IMF pressure in mid-January, loosening controls on the rupee to rein in a rampant black market in US dollars, a step that caused the currency to plunge to a record low,
and hiked petrol prices by 16 percent.
Dar on Feb. 10 said petrol prices would rise by roughly 4 percent and additional taxes would be imposed, without giving further details.