Staff Report
ISLAMABAD: Formal talks between Pakistan and the International Monetary Fund (IMF) kicked off in Islamabad on Tuesday as the cash-crunch country attempts to get loan from the international lender under the ninth review.
The IMF delegation led by Mission Chief to Pakistan Nathan Porter met with Finance Minister Ishaq Dar.
The meeting reviewed the possible implementation of the ninth review mission.
Technical talks between Pakistan and the IMF would continue till February 2, 2023.
As IMF officials visit to discuss vital cash injection, Pakistan has been gripped by major economic issues, with the rupee plummeting to record-low and inflation all-time high, and energy in short supply.
The IMF is pushing Pakistan to expand the tax base and do away with various subsidies, but the government has shown reluctance fearing backlash ahead of elections due in October. But in recent days, with the prospect of national bankruptcy looming and no friendly country willing to offer a bailout package, Islamabad has given in to pressure from the lender.
The Pakistani government has loosened controls on the rupee and reined in a rampant black market for the sale of US dollars, which has led to a plunge of the local currency to a record low.
The government recently hiked the prices of petroleum products to shore up revenues.
IMF demands and Pakistan
“We are at the end of the road. The government has to make the political case to the public to meet these IMF demands,” ex-World Bank economist Abid Hasan told the AFP. “If they don’t, the country could certainly default, and we could end up like Sri Lanka, which could be even worse.”
Nasir Iqbal from the Pakistan Institute of Development Economics warned that the economy has already “virtually collapsed” due to mismanagement and political turmoil.
Cost-of-living crisis
As the IMF delegation arrived, Pakistan still reeled from unprecedented floods that submerged a third of its territory. The global fifth-biggest population has less than 3.7 billion dollars in foreign reserves, which is only enough to cover just three weeks of imports.
Pakistan is only issuing letters of credit to importers for essential medicines and food, causing a backlog of thousands of shipping containers at the Karachi port stuffed with stock the country badly needs.
The Pakistani industry has been hammered by import block and massive rupee devaluation. Public construction projects have almost halted, textiles industries have partially shut down, and domestic investment has slowed.
Pakistan Stock Exchange recovered
The Pakistan Stock Exchange (PSX) recovered on Tuesday as the IMF delegation arrived in Pakistan to discuss the revival of the stalled loan programme.
The KSE-100 index jumped 585.35 points, or 1.47%, to reach 40,456.62 points at 11:28 am.
Arif Habib Corporation Director Ahsan Mehanti said share prices soared in hopes the stalled IMF programme would revive and the country survive default.
He said that the prospects of reviving the programme had brightened after the government removed an unofficial cap on the USD-PKR exchange rate and allowed the local currency to devaluate along with raising petroleum prices.
