Finance Minister, Miftah Ismail considers progress on stalled IMF loan and cuts in spending as escape from current economic crisis in Pakistan without diving into default.
During a telephonic interview, Miftah Ismail blamed global prices and Russia-Ukraine war for the serious crisis. He said, “with the commodity super cycle and Russia-Ukraine war, oil prices skyrocketing and gas going as high as ever been in history, Pakistan and other emerging countries have been facing the worst crisis.”
He continued by saying, “Nonetheless, Pakistan has weathered the storm by participating in an IMF programme, implementing a relatively tight budget, and suppressing import demand.”
He was giving the comments in light of country’s staff level agreement with the global lender for reviving a $6 billion dollar loan programme. Earlier today, a journalist from private media channel shared on Twitter that Prime Minister permitted Chief of Army Staff (COAS) to talk to the US administration with the request to use its influence for the early disbursement of IMF funds to Pakistan & after doing so, COAS reported the matter back to the premier. He added, “Who said COAS doesn’t follow orders.”
PM gave permission to COAS Bajwa to talk to US administration with the request to use its influence for the early disbursement of IMF funds to Pakistan & after doing so, COAS reported the matter back to the premier. Who said COAS doesn’t follow orders.. https://t.co/parl8rz87s
— Siyar Ali Shah (@iSiyarAliShah) August 1, 2022
In addition, IMF and diplomat sources revealed that the IMF is expected to begin the process of disbursing the seventh and eighth tranche of a $6 billion loan package for Pakistan.
As the IMF’s summer break ends on Aug 12, one of the sources said, “so, technically the IMF Executive Board’s meeting could take place before Aug 20, if recommendations are sent to the board by Aug 6.”
According to a State Bank of Pakistan presentation, Pakistan requires a total of $33.5 billion from now until June 2023, with available finance totaling $35.9 billion for the same period.
Mr. Miftah made a clear statement, “everything is settled now, “Pakistan is absolutely going to make each and every payment and each and every bond.”
As mentioned in the joint press release by the central bank and Ministry of Finance, Pakistan decreased its imports by 35 percent to $5 billion in July, which will in turn help check the nation’s current-account gap.
Moreover, the surge in domestic energy prices by 50 percent to win the IMF bailout programme will also curb energy demand and imports that has caused a massive pressure on the currency.
The Rupee lost more than 14 percent against the greenback in July, ending Friday’s trading at 239.4 per dollar. It was one among the worst currency decliners in the world last month. On Monday, the currency was nearly unchanged.
The press release stated that the Rupee has overshot due to concerns about domestic politics and the IMF program. This uncertainty is being resolved, such that the sentiment-driven part of the Rupee depreciation will also unwind over the coming period. Moreover, they mentioned that the depreciation in currency is not permanent and is expected to appreciate in next few months.