Finance minister says Pakistan 'absolutely committed' to completing IMF programme

Ishaq Dar, Pakistan's finance minister, reiterated that Pakistan was close to signing the staff-level agreement on Thursday and reaffirmed that he and his team were "absolutely committed" to finishing the $7 billion Extended Fund Facility programme with the International Monetary Fund (IMF). 

"The country has just enough reserves to cover three weeks' worth of crucial imports, and the administration has until November to undertake the measures necessary" in order to achieve an agreement with the IMF, the minister added.  

Dar stated today in Islamabad at a seminar held by the Finance Ministry: “I and my team have decided that, in a short period of time, we will implement and we will discharge all the sovereign commitments that the previous government had made.” He recalled that the economy was "in shambles" when the coalition administration took office.

“To top it [off], the previous government had agreed to a loan facility which was extended by the IMF. But instead of honouring the commitments, they reversed some conditionalities before leaving office. This led to a serious trust deficit [between the lender and Pakistan],” he highlighted.

Nonetheless, the minister continued, the government has opted to uphold the agreements after realising that these duties were made by Pakistan's sovereign state and not by a person. “We have been in the process of the 9th review which has taken longer than it should have […] we seem to be very close to signing the staff-level agreement, hopefully in the next two days,” Dar added.

He also highlighted that becuase of the policy framework, the ninth assessment of a $7 billion loan programme has been delayed since late last year. When it is completed, $1.2 billion will be paid out and the door will be opened for inflows from friendly countries.

The lender's requirements are designed to make sure Pakistan reduces its fiscal deficit before presenting its annual budget in June. Pakistan has already implemented the majority of the other earlier measures, including boosting energy and fuel prices, cutting subsidies for the export and power sectors, and raising more funds through new taxes in a supplemental budget, Dar added. 

Budgetary restrictions

The minister stated that Pakistan was now experiencing difficulties and that everyone needed to work together to find solutions.  He said: "As they say, charity begins at home and the prime minister has announced an austerity package," and then went on to highlight some of its key components.

Last month, Prime Minister Shehbaz Sharif unveiled a number of what he described as austerity measures. Among them were cabinet ministers forgoing their salary, handling their own expenses, prohibiting the purchase of luxury cars beginning in 2024, and cutting existing spending by 15%. Dar stated at the seminar today that these actions had already been taken and the Finance Ministry had been notified.

Rehabilitation of flood victims

The minister added that the terrible floods of 2022, which impacted 33 billion people and resulted in losses of property and the economy of close to $30 billion, made Pakistan's economic problems much worse. “But despite the fiscal constraints and limitations, the federal and provincial governments have jointly allocated Rs452bn for relief and rehabilitation work of flood affectees. If need be, we will together provide more resources to our brothers and sisters in need," he added.

Dar stated that it was estimated by foreign organisations that Pakistan will need to spend roughly $16 billion on restoration and rehabilitation over the next two years. “At the Geneva conference, we had already announced that half of this bill will be met by Pakistan from its own resources — which is $8bn or Rs3,200bn. And we have done work on this,” Dar said.

The minister added that it was regrettable that "petty politics" were being practised in Pakistan despite the fact that the nation was beset by numerous difficulties. “This persistent fake propaganda regarding the country defaulting on its international obligations is completely ill-founded and null […] in fact it harms the country,” he emphasised on.

Dar expressed sadness that his pleas for the political parties to get together and sign a charter of economic principles always fall on "deaf ears" and that he had been making them for years.