The International Monetary Fund (IMF) has set strict conditions for Pakistan to get the new bailout programme, said sources within the Ministry of Finance. The sources privy to the development said that the IMF asked the federal government not to borrow from the State Bank of Pakistan and to only sell sukuk bonds in the stock market.
The IMF has also asked the Pakistani government to set the dollar exchange rate according to market conditions and fixation of the interest rate as per inflation. The sources said that the IMF also sought the implementation of a strict monetary policy for reduction of the budget deficit.
The maintained that debts and interest payments on Pakistan are the main reason for the deficit, asking the finance ministry to reduce pensions and other expenses. The sources said around Rs 9,787 billion will be set aside for loan interest in the next fiscal year’s budget while the current fiscal year’s loan interest payments are expected to be Rs 8,371 billion. In the first nine months of the current financial year, Rs 5,518 billion has been paid in interest on internal and external loans.
It is pertinent to mention here that Pakistan is seeking new bailout programme with the IMF. The monetary fund also confirmed that talks are underway with Pakistan on 24th ‘longer and larger’ bailout programme under the Extended Fund Facility.
When asked about the staff-level agreement, IMF Communication Director Julie Kozack – while addressing a press briefing – avoided answering, indicating that the negotiations are still ongoing. “Right now, a mission team led by Nathan Porter is meeting with Pakistan authorities this week to discuss the next phase of our engagement.”
She said: “On April 29th of this year, our Executive Board completed the second review of the stand-by arrangement for Pakistan, allowing a disbursement of about $1.1 billion.
