HomeHot NewsIMF program terms will be fulfilled by the government, promises PM Shehbaz

IMF program terms will be fulfilled by the government, promises PM Shehbaz

In a conversation with the managing director of the lender yesterday, Prime Minister Shehbaz Sharif said he had expressed his government’s determination to fulfil the requirements of the International Monetary Fund’s (IMF) programme.

The phone call occurs at a time when Pakistan’s economy is becoming more agitated and its foreign exchange reserves only cover less than three weeks’ worth of imports.

PM Shehbaz posted on Twitter, “In a phone call with Managing Director [Kristalina Georgieva] of the IMF yesterday, I told her about the government’s resolve to fulfil the requirements of IMF’s programme.”

“I also discussed Pakistan’s economic challenges, particularly in light of the devasting floods. A delegation from the IMF will soon visit Pakistan.

Following his announcement that an IMF delegation would visit Pakistan in “two to three days” to complete the ninth review of Pakistan’s $7 billion Extended Fund Facility, the premier made the following statement (EFF).

In 2019, Pakistan signed up for a $7 billion IMF programme, which was later increased to $6 billion. The ninth review of the programme, which would release $1.18 billion, is still pending. It was previously delayed for two months because the PML-N-led government refused to agree to some requirements put forth by the Fund, and the issues still haven’t been resolved.

Cash crunch

The State Bank of Pakistan’s (SBP) foreign exchange reserves have dropped to an eight-year low of $5.576 billion during the week ended on December 30, 2022, indicating that the nation is currently experiencing a severe cash shortage.

Due to this decline, the government was unable to repay its foreign debts without taking out new loans from allies.

Finance Minister Ishaq Dar is optimistic that the rapidly declining SBP reserves can be reversed with the anticipated financial assistance promised by the friendly countries, but nothing has been realised thus far.

For the repayment of external debt, the SBP’s foreign exchange reserves lost $245 million over the course of the week.

The most concerning issue for the coalition government led by the PMLN that faces a real default risk is how to service foreign debt. There have been numerous unsuccessful attempts to pick up the conversation with the IMF about releasing the following tranche.

Related: Another $1 billion is due for Pakistan

The local currency has already been significantly devalued in comparison to the US dollar and other major currencies due to the declining reserves. The SBP’s foreign exchange reserves decreased by $11 billion, from $16.6 billion in January 2022 to $5.6 billion today.

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