According to a media report on Friday, Pakistan’s caretaker Finance Minister Shamshad Akhtar stated that the country’s economy remains unstable despite improvements and that the cash-strapped country will need to seek further IMF loans for some time.
According to the Dawn newspaper, Akhtar also stated that Pakistan needs robust financial reforms to develop its economy.
“The next International Monetary Fund (IMF) programme will be very necessary for some time, as the economy has returned to a state of stability that was previously very fragile.” “We will need another programme until we can increase exports and domestic resources,” Akhtar remarked.
Her statements came a day after the Pakistani government and the IMF completed a staff-level assessment of the continuing USD 3 billion stand-by agreement, clearing the way for Pakistan to receive USD 700 million in the second tranche.
She stated that long-standing changes were no longer an option.
“Without this, the country will perish.” We will almost certainly need to enter another EFF [Extended Fund Facility]. We will continue to work with the IMF,” she said, adding that it may be premature to discuss this.
Akhtar stated that her goal was to quickly begin working on the final USD 1.1 billion tranche under the current facility so that the next administration would not have any difficulties, but “if we have time, we will also discuss this [new programme]”.
She also underlined crucial elements of the IMF deal, including the government’s commitment to regular tariff changes, including a scheduled gas price increase in January to avoid the building of circular debt in both the gas and power sectors.
She stated that energy and gas pricing would be regularly updated and expenses regulated, in addition to handing management to the private sector as quickly as possible and institutionalising ongoing campaigns against power and gas theft.
She also stated that Pakistan would need to fully adhere to the market-determined exchange rate, remain responsive through adequate monetary policy adjustment, particularly to core inflation, and bring four more state-owned enterprises in line with the newly approved SOE law’s financing and governance template.
Akhtar also attempted to assuage fears about the external financial gap and voiced optimism about meeting the tax collecting target. She stated that the administration would continue to prioritise budgetary consolidation in order to achieve macroeconomic stability and balanced growth.
She stated that, unlike in the past, no previous action by IMF management was required this time before accepting the staff-level agreement, bringing total releases under the USD 3 billion programme to USD 1.9 billion, with USD 1.1 billion reserved for the next and final review.
When asked about the deferral of the new USD 1.5 billion international bond, Akhtar cited high interest rates and expensive market circumstances as major concerns.
“I’ve decided to delay the new (international) bond.” It’s going to be costly. Interest rates are extremely high. As a result, we are unable to access the foreign market,” she explained, adding that the government would repay the USD 1 billion bond that would mature in April of next year.
She stated that the government was looking into other options.
According to her, the staff-level agreement would allow the World Bank (USD 350 million), the Asian Development Bank (USD 350 million), and the Asian Infrastructure Investment Bank (USD 250 million) to approve loans totaling USD 1 billion.
During the current fiscal year, Akhtar intended to secure a USD 2 billion disbursement from the World Bank alone.
She stated, “We are quite comfortable with external accounts,” hoping that the IMF’s staff-level agreement, followed by disbursements from other multilaterals, would boost Pakistan’s credit rating.
In response to a query, she stated that the government would need to expedite SOE reforms in order to enhance the business climate.