• Sun. Jun 4th, 2023

Cold-shouldered by IMF, Pakistan may turn to China for bailout

ISLAMABAD: Pakistan will have no other option but to ask China for devising a mechanism to bailout the ailing economy of Islamabad for averting full fledge eruption of the Balance of Payment (BoP) crisis if IMF continues the declining revival of the Fund programme.

Now the policy makers are left with no other options but to explore all other ways to avert BoP crisis and default as well as choking of the economy up to the unprecedented levels.

“Amid deepening political and economic crisis in the country, the IMF has adopted the policy of wait and see but this policy cannot be pursued for longer period. Either the IMF will have to be revived through completion of 9th review or the programme will be scrapped. We will share no more data with the IMF without completion of ninth review” top official sources confirmed while talking to The News here on Monday.

Pakistan had adopted the policy of import restrictions to manage its economy in order to avert default. There was one ambassador of western capital who recently visited one of the economic ministries in Islamabad and inquired from one of the sitting ministers when the economy of Pakistan was expected to be meltdown. This blunt question from the dignitary shocked the minister who told the visiting diplomat that Pakistan would never default. The diplomatic community also started inquiring about “domestic political affairs” on internal politics.

Keeping in all these developments, independent economists are now suggesting the government make last-ditch efforts of reviving the IMF programme or clearly look towards China to bailout the struggling economy.

Former minister for Finance and renowned economist Dr Hafiz A Pasha told this scribe that if the IMF did not move forward then Pakistan would have no other option but to request China to devise any mechanism for helping Islamabad to avert blown out of full fledge crisis. He said that the Asian Infrastructure Investment Bank (AIIB) could be used as instrument to help out Islamabad for averting BoP crisis as we knew it was not its mandate but there should be any institution assuming the role of Asian IMF.

When contacted, Dr Khaqan Najeeb, former advisor Ministry of Finance, said undoubtedly the country has taken a number of steps for macro stabilisation and paving the way for completion of the 9th review. However, considering a weak SBP reserves position at just $4.38 billion and a precarious balance of payment position the IMF is being extra careful in ensuring financing needs are more than adequately met. Authorities have tried but have been unable to give comfort to the lender in this regard.

He also pointed to the easing of imports. IMF would be keen for Pakistan to build reserves and ease the administrative restriction, which has halved Pakistan’s imports in April (YoY) to just $2.9bn as per PBS data. The advisable solution is for the IMF to be considerate as a staff-level agreement can ease commercial and multilateral inflows. Pakistan authorities probably can do more work to ensure an airtight financing plan.

In case the two sides do not come to an agreement the country would have to continue with heightened restrictions on imports, a clogged economy, and borrowing and rollovers from friendly countries and others wherever possible. This is not the preferred option for Pakistan to continue with a constrained economy, he concluded.

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