'Political situation delaying IMF deal'.

WASHINGTON -- The political situation in Pakistan has become a factor in delaying a deal with International Monetary Fund (IMF) that may stabilise the national economy, diplomatic sources told Dawn.

Sources say that global lenders, particularly the IMF, are seeking assurances from Pakistan that the future political setup in the country will respect any deal they sign with Islamabad. Pakistan and the IMF have been negotiating the resumption of an installed $7bn IMF programme for months now but are yet to reach an agreement.

Last week, Finance Secretary Hamed Yaqoob Sheikh told reporters that an agreement was likely in the next few days, though Pakistan has missed such timelines in the past as well. Sources Dawn spoke to said that Pakistan has already implemented a series of policy measures that the IMF suggested, including increased taxes, higher energy prices and increasing interest rates to the highest in 25 years.

But two major issues remain unresolved: financial and political assurances. The IMF wants Pakistan to show that it can raise enough financial resources to narrow its balance of payments gap.

Since the IMF only provides a part of the loan a borrower needs, it requires the borrower to show that it has pledges from other lenders to bridge the gap.

According to the sources, China, Saudi Arabia, and other partners have come forward with help offers but the IMF thinks it is not enough. The government of Pakistan says that the gap is $5bn, but the IMF believes Pakistan needs $7bn.

The IMF also needs the assurance that the government signing the deal can implement it. But the expected elections in KP and Punjab, and the possibility of the national elections soon after, have persuaded the IMF to think that the present government may or may not be there to implement the deal it signs.

'That's why the IMF would also need an assurance from the opposition forces, particularly the PTI, that they will respect the deal too if they replace the present government,' one of the sources...

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