The seal for the International Monetary Fund is seen in Washington, DC, on January 26, 2022. The Omicron variant of Covid-19 is creating an obstacle course for the global economy, which will slow growth this year, notably in the world’s two largest economies, the IMF said January 25, 2022.
The International Monetary Fund (IMF) has said Pakistan needed to secure financing assurances from multilateral institutions as well as friendly countries like China, UAE and Saudi Arabia to unlock a critical bailout loan the South Asian country desperately needs to avert an economic meltdown.
Pakistan and the IMF have been engaged in talks to reach a staff level agreement for a bailout package of $1.1 billion that has been delayed since November mainly over issues related to fiscal policy adjustments.
The latest deal will also unlock other bilateral and multilateral financing avenues for Pakistan to shore up its foreign exchange reserves, which have fallen to four weeks worth of import cover.
The IMF wants Pakistan to get assurance for up to $7 billion to fund this fiscal year’s balance of payments gap. Finance Minister Ishaq Dar has been saying it should be around $5 billion.
Speaking to reporters on Thursday, IMF communications director Julie Kozack said a staff level agreement would follow after financing assurances, which were a “standard feature” of all IMF programs.
“Aside from support provided by the IMF, Pakistan’s Extended Fund Facility supported program receives financing from other multilateral institutions, including the World Bank, the ADB (Asian Development Bank), and the AIIB (Asian Infrastructure Investment Bank) and bilateral partners, notably China, Saudi Arabia, and the UAE,” Kozack told reporters.
“So, we do need to ensure that we have those financing assurances in place in order for us to be able to take the next step with Pakistan.”
Kozack said Pakistan’s economy faced multiple challenges, including slowing growth, high inflation and large financing needs, all made worse by devastating floods last summer that had caused over $30 billion in losses to the economy.
“[Pakistani] authorities are committed to implementing the necessary reforms,” she said.
“They’ve started to implement decisive actions to stabilize the economy and restore confidence … Timely financial assistance from external partners will be critical to support the authorities’ policy efforts and ensure the successful completion of the review.”
The Pakistan government has implemented several fiscal measures, including devaluing the rupee, lifting subsidies and raising energy prices as preconditions for the IMF agreement, which the finance minister said this month was “very close”.
