Pakistan Needs to Do These 3 Things to Stand a Chance for An IMF Bailout

Pakistan must satisfy the International Monetary Fund (IMF) on the proper functioning of the Foreign exchange market, a federal budget consistent with the lender’s objectives, and securing credible financing commitments to close the $6 billion gap in order to book its agenda for approval this month.

The lender’s resident representative for Pakistan, Esther Perez Ruiz, told Reuters on Thursday that there was time for just one more IMF Board review before the $6.5 billion Extended Fund Facility (EFF) expires on June 30.

“As communicated to the authorities, there can be one remaining Board meeting under the current EFF at end-June,” she said.

Ruiz stated, “To pave the way for a final review under the current EFF, it is essential to restore the proper functioning of the FX market, pass a FY24 Budget consistent with program objectives, and secure firm and credible financing commitments to close the $6 billion gap ahead of the Board”.

On the subject of IMF’s expectations for budget 2023-24, the Fund’s representative said, “The focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space to increase social spending”.

She said such measures would indeed alleviate inflationary pressures on Pakistan’s most vulnerable communities, but it still needs to make an effort and identify spending and revenue-generating measures to accomplish this.

In order to persuade the IMF to release funds, the government has levied taxes, hiked energy tariffs, and reduced subsidies, and the central bank has boosted policy interest rates to a record 21 percent.

More cash and the IMF loan are critical in overcoming the crisis, alleviating supply shortages, and pulling the economy out of default risk before elections later this year.

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