The inconclusive end of talks between Pakistan and the IMF on Thursday after 10 days on Thursday, which included an unscheduled three-day extension has left Pakistan without a letter of intent being issued or a staff-level agreement reached, though a Memorandum of Economic and Financial Policies was made. There has been an understanding that further negotiations will take place virtually, but that is just a polite way of saying that the IMF has not yet agreed to release the $1.1 billion tranche of the stuck-up Extended Structural Adjustment Facility that is considered crucial by friendly countries, which have linked their loans to Pakistan on the IMF agreeing to resume the programme.
Finance Minister Ishaq Dar has not entirely given up, and in a press conference after the IMF team’s departure, announced that there would be a mini-budget for Rs 170 billion in new taxes, after which the agreement would be finalized. Overall, the failure to reach an agreement left Pakistan precariously poised on the edge of default, with the State Bank of Pakistan announcing that foreign exchange reserves were down to $4.2 billion, which was barely enough to cover three weeks of imports.
It also became obvious that the government was in severe need of coordination. The PPP cannot really be blamed for distancing itself from this particular train-wreck, not when the PML(N)’s own Khurram Dastagir Khan, the Energy Minister, was nowhere to be seen or heard even when his Ministry was supposed to take the tough decisions necessary on the power tariff, which are necessary for the IMF to sign off on the package resumption. Prime Minister Shehbaz Sharif has also restricted himself to cryptic statements. The replacement of Miftah Ismail by Senator Dar seems to have been the point at which it went awry for the government, with his ill-advised attempt to curtail inflation by reducing the rupee’s dollar parity through artificial means. The PML(N) was at pains to point out no doubt accurately, that it was merely implementing an agreement originally reached with the PTI government, but that does not cut much ice with the electorate. While the IMF’s preconditions were brutally punishing, they are dwarfed by the consequences of the default that has inched closer. And that will not be any more palatable to the voters.
