Govt unhappy as IMF ‘shifts goalposts’

 Govt unhappy as IMF ‘shifts goalposts’

• Officials hint at a "situation like 1998," according to foreign capitals working for Pakistan's "meltdown" • Sources claim Fund pushing measures that may hit low-income groups despite its pro-poor mantra ISLAMABAD: It has been difficult for the government to convince the International Monetary Fund (IMF) to release a loan installment, despite the government's efforts to present a brave face in its struggle to obtain crucial funding. In-depth discussions with officials, however, have revealed that the administration is actually quite nervous beneath its confident exterior.

Before reaching a staff-level agreement (SLA) on the urgent economic bailout, the International Monetary Fund (IMF) has altered its interpretations of at least four previous actions.

According to sources, the authorities are extremely enraged by the most recent circumstance, calling it "maltreatment."

A disgruntled senior official said, "We are members of the IMF, not beggars or else our membership be discarded."

Another official even compared the current circumstance to that of 1998, when Pakistan's financial woes got worse as a result of nuclear tests and default appeared imminent.

Officials have also said that the International Monetary Fund (IMF) wanted to publicly help the poor but had been insisting on some measures that would ultimately hurt the poor.

However, in spite of this disappointment, the authorities anticipate — at least officially — the conclusion of the SLA next week and the realization of financing support from friendly nations, some of which took longer to materialize due to signals from the Fund.

They, on the other hand, acknowledge that one of the primary factors that influenced some capitals to work for Pakistan's "meltdown" was a gap in Islamabad's diplomatic efforts, as well as Pakistan's credibility and trust deficit following the reversal of previously agreed-upon policy actions.

According to reports, Pakistan's projection for the current fiscal year is $5 billion, but the IMF estimates an all-inclusive financing gap of approximately $7 billion. One official, on the other hand, expressed optimism that the State Bank of Pakistan's foreign exchange reserves would surpass $10 billion by the end of June, up from just over $3.1 billion at the moment.

In addition to the $700 million that has already been received, the sources claim that authorities have secured three tranches of $1.3 billion in inflows from Chinese banks. This would be distributed in two equal installments of $500 million followed by $300 million over a few days. Over $3 billion would also be made available to Saudi Arabia and the UAE.

An early increase in the central bank's interest rate to represent general inflation, a change in the exchange rate to accommodate cash outflows to Afghanistan, written assurances from friendly nations to fill the external financing gap, and the continuation of the Rs3.39 per unit financing cost surcharge on electricity consumers through the finance bill instead of the government's four-month announcement are the four items on the unfinished IMF loan program agenda.

However, one official said that this last requirement was "unreasonable." The argument is that a surcharge like this would help close the financing gap in the power sector in the years to come, and how this could be done in the future with the help of the parliament and the judiciary.

The government-SBP deadline, which requires exporters to bring their proceeds immediately or face conversion at outdated exchange rates, is also criticized.

After publicly insisting on adhering to the original March 16 schedule, the State Bank of Pakistan was forced to move the meeting of its monetary policy committee to March 2.

The rupee's value against the dollar decreased by 0.6 percentage points as a result of the exchange rate adjustment on Tuesday, closing at Rs261.50. This is odd because there had to be a difference between the exchange rate based on the market and the one in the grey market, where people from the sanctioned country across the border would always offer a higher rate for their needs.

. Even market-based corrective measures are opposed, according to another source.

Even a concluding statement from the Fund was supposed to report "comprehensive dialogue and positive outcome of the talks," but it was watered down during the approval process abroad, where some influential quarters were said to be "more political than politicians." Officials suggest that all matters had been resolved prior to the IMF mission's conclusion of its visit to Pakistan on February 9.

An official said that the coercive situation is similar to that of 1998, when the West moved behind the scenes to punish Pakistan for nuclear tests and wanted "Pakistan's denuclearization." This time, some 

According to the sources, the IMF publicly desired taxes on the wealthy and assistance for the underprivileged, but it insisted on raising general sales tax rates, which were inflationary and had an impact on the underprivileged, while it opposed taxes on high-earners like banks through foreign exchange transactions. In a similar vein, opponents of the flood tax on high-end organizations argued that these were not quality measures.

According to sources, Pakistan received the draft Memorandum of Economic and Fiscal Policies (MEFP) for the first time in February. Since then, the agreed-upon steps that Pakistan had already implemented—raising gas and electricity prices and swiftly passing a Rs170 billion minibudget—have undergone revisions.

Prior actions are usually completed before the IMF's executive board meets to approve the quarterly review, but this time they were tied to the staff-level agreement. This is also unusual,” a representative stated.