IMF to resume stalled $ 6 billion Pakistan lending program
The IMF and Pakistan have announced the resumption of a stalled $ 6 billion loan program, raising hopes that the South Asian country will return to global bond markets as it struggles to revive its economy affected by Covid.
In a statement on Tuesday, the fund said a new package of measures agreed under a three-year loan signed in 2019 aimed to “ensure debt sustainability and push forward with structural reforms.”
The deal was expected in October last year but was delayed, Pakistani officials say, mainly because of Prime Minister Imran Khan’s decision refusal to accept belt tightening measures at the height of the coronavirus pandemic.
Pakistan received $ 1.4 billion from the IMF in April 2020 to help it cope with the pandemic. The fund said on Tuesday that its support had helped the government adopt health containment measures and put in place a temporary fiscal stimulus, a broad expansion of the social safety net, support for monetary policy and targeted financial initiatives.
The Asian Development Bank (AfDB) has said it expects Pakistan’s economy to grow 2% this year after contracting in 2020.
After Tuesday’s announcement, a senior government official told the Financial Times that Pakistan had already raised the price of home energy, one of the terms agreed with the IMF.
Other measures are expected to include an increase in tax revenue in the next fiscal year July-June, he said.
Muhammad Suhail of Topline Securities, an equity advisory group in Karachi, said the deal ended a period of uncertainty over Pakistan’s relationship with the fund.
Pakistan, he said, was now “very likely” to exploit world markets by offering new Eurobonds and Islamic “sukuk” bonds denominated in US dollars, “with confidence now that relations with the IMF have been restored “.
However, analysts warned, the resumption of IMF lending still presented Islamabad with a number of domestic economic challenges, as well as the management of its external debt and commitments which stood at around $ 113 billion in 2020 according to the report. the central bank of Pakistan.
“Pakistan will almost certainly need a successor IMF program when the current program ends in 2022. External debt repayments will remain high and inflows from areas like exports will not be able to support growth momentum. “said Sakib Sherani, economist and former adviser. at the Ministry of Finance.
Business leaders warned that chronic structural difficulties continue to undermine Pakistan’s growth potential.
“When you recently suffered a blackout virtually all over Pakistan, you wonder how long it will take Pakistan to meet its many challenges,” said the director of a Karachi-based investment firm that has interests in the stock market, automobiles and construction. , referring to a massive power cut last month.
However, senior politicians close to Khan said he was now better prepared to face a public backlash against IMF reforms amid a campaign of opposition that may have already discouraged him from ‘adopt painful new measures.
“In December, many of us thought there was a big threat around the corner. But today the opposition protests have lost momentum, ”said a cabinet minister for Khan. “I think we are now in a better position to face them [the opposition]. “