Pakistan to approach IMF for bailout package
He says efforts are afoot to protect the interests of lower income segments of society
ISLAMABAD (Dunya News) – Finance Minister Asad Umar on Monday said that the government has decided to start negotiations with International Monetary Fund (IMF) for stabilization and recovery of national economy.
In a video statement released on Monday, he said the government inherited loans worth billions of rupees, which needs to be managed.
The minister said that difficult decisions the government has to take will help stand the national economy on its feet.
Asad Umer went on to say that the government wants to create such an environment where the cycle of going to international financial institutions is not repeated by successive governments. He said that efforts are afoot to protect the interests of lower income segments of society.
If an assistance package is agreed on, it would be Pakistan s second IMF bailout in five years and its 13th since the late 1980s.
Prime Minister Imran Khan made the decision on Monday after meeting with top economic advisers, Umar said in the interview.
He did not specify how much in emergency financing the government would seek, but he had earlier said the government would need at least $8 billion to meet external debt payments through the end of the year.
Pakistan s current accounts deficit has been widening since before the July 25 election that brought Khan to power, but his new government wanted to explore options outside the IMF including additional bridge loans from China and deferred payments scheme for oil with Saudi Arabia.
Khan s decision came after the Pakistani stock markets tumbled by 3.4 percent on Monday after Khan said the day before that he was still exploring options outside the IMF.
Pakistan’s current account deficit widened 43 percent to $18 billion in the fiscal year that ended June 30, while the fiscal deficit has ballooned to 6.6 percent of gross domestic product.
The rupee has fallen by more than 20 percent in four devaluations since December. On Monday, the currency was trading at 128 per U.S. dollar on the open market and 124.20 in the official interbank rate.
Monday s news was welcomed by brokers as a clear signal that could help steady markets tired of nearly two months of uncertainty since Khan s government took office. "It was much needed and about time," said Saad Hashemy, research director for Pakistani brokerage Topline Securities. "Any further delay would have harmed the already very fragile economy."
Earlier on Sunday, a team headed by Finance Minister Asad Umar met Prime Minister Imran Khan in Islamabad and briefed the latter on a potential nine billion dollars bailout package.
Previously, an IMF mission led by Harald Finger had visited Pakistan and met key stakeholders within the government. It also held a wrap up meeting with Finance Minister Asad Umar and his team, sharing its initial assessment of the economy.
The mission in its evaluation highlighted the imminent challenges facing Pakistan’s economy including fiscal deficit, current account deficit, low level of reserves, accumulation of losses in public sector enterprises, non-execution of structural reforms, weakening of institutions and lack of domestic resource mobilisation.
The mission stated that the corrective measures recently taken by the government of Pakistan were in the right direction.
The visiting team was of the view that further actions were required to be undertaken to correct imbalances in the economy and to put it on a path of sustainable growth.
Watch the video below
