ISLAMABAD: On Wednesday, the International Monetary Fund (IMF) resumed discussions with Pakistani authorities over the transfer of critical funds, a procedure hampered by worries about the speed of economic reforms and domestic political pressure on the new administration.
Pakistan has requested foreign assistance for its economy, which has been battered by heavy national debt, soaring inflation, and a falling currency.
The negotiations are taking place in Doha, Qatar’s capital, and are scheduled to continue until next week, according to Pakistan’s finance minister.
The Ministry of Finance verified the allegation on Twitter, saying that Finance Minister Miftah Ismail, Acting Governor SBP Murtaza Syed, FBR Chairman Asim Ahmad, and others participated electronically in the meeting
Costly subsidies, particularly for gasoline and energy, are expected to be a significant sticking point, and Finance Minister Miftah Ismail said he wants the two sides to “reach a common ground.”
“The administration will attempt to persuade the IMF that keeping at least part of the subsidies is necessary for political stability,” said economist Shahrukh Wani.
“The IMF will likely argue that they are unsustainable and that they should be reversed to bring the trade and budget deficits under control,” he said.
Former Prime Minister Imran Khan signed a six-billion-dollar IMF rescue plan in 2019, but his administration failed to follow through on promises to decrease or eliminate certain subsidies and enhance income and tax collection.
Pakistan has received $3 billion so far, with the programme set to expire later this year.
Officials want the programme to be extended until June 2023, as well as the next $1 billion tranche to be released.
Shehbaz Sharif, who came to power with a coalition that ousted Khan in a no-confidence vote last month, has promised to revive the country’s stagnant economy, but observers believe his shaky administration has failed to make difficult choices.
“It’s a government that has failed to take tough political moves to deliver ultimate economic relief,” said Michael Kugelman, deputy South Asia director at the Wilson Center in Washington.