By Staff Reporter
ISLAMABAD: Finance Minister Ishaq Dar on Thursday said Pakistan would meet its debt obligations until December of this year and avoid defaulting, regardless of whether the International Monetary Fund (IMF) bailout program is revived.
Dar’s comments came in response to Moody’s Investor Service warning that Pakistan’s financing options beyond June were highly uncertain, and default could be a possibility without an IMF bailout.
Pakistan is currently grappling with a severe balance of payment crisis, with its foreign exchange reserves dwindling to a meager four weeks’ worth of controlled imports.
However, Dar reassured the nation at a conference that Pakistan had made provisions for all pending payments until December, emphasizing the country’s ability to manage its affairs independently.
“Let me assure you, we have taken care of every payment due till December this year, and Pakistan will not default, IMF or no IMF,” Dar said. “We are a sovereign country and know how to manage our affairs as we did during the worst sanctions period in 1998 when we tested nuclear weapons, and we will do it now.”
Dar criticised the delay in finalising a Staff Level Agreement (SLA) with the IMF, stating that it should have been concluded “long ago.”
It has been nearly 100 days since the last IMF staff level mission to Pakistan, and no preliminary deal has been reached, marking the longest gap of its kind since 2008.
The pending $1.1 billion tranche is part of a $6.5 billion bailout package approved by the IMF in 2019, which is scheduled to end in June. To date, Pakistan has received $3.9 billion.
The country has implemented measures such as tax increases, removal of subsidies, and the removal of artificial curbs on the exchange rate to secure the IMF loan.
“I have dealt with this institution [IMF] for 30 years as a four-time finance minister, and this SLA should have been signed ages ago, but let them try and take their time,: finance minister said. “We have no issue as we have done everything they asked for under the sky, but do not spread rumors like these [of default] to make the market nervous. Pakistan is here to stay and will progress and develop.”
The finance minister attributed the delay in finalizing the SLA to an external accounts gap and the need for commitments from friendly countries to materialize.
Pakistan has announced pledges of $3 billion in financing support from Saudi Arabia and the UAE, but the funds have yet to be received. Additionally, China, a longstanding ally, has rolled over and refinanced its loans.
Pakistan and the IMF have had disagreements regarding the financing gap. It remains uncertain whether the commitments from Saudi Arabia, the UAE, and China would be sufficient, or if additional external support would be required.
Meanwhile, the IMF said on Thursday Pakistan requires significant additional financing to successfully complete the long-delayed ninth review of its bailout package.
The release of pending bailout funds, crucial for Pakistan to resolve its balance of payments crisis, would depend on obtaining commitments of significant additional financing.
Julie Kozack, an IMF spokeswoman, welcomed the financing already committed by Pakistan’s external partners, including the UAE, Saudi Arabia, and China.
“Our team is very heavily engaged, of course, with the Pakistani authorities because Pakistan indeed faces a very challenging situation,” Kozack said during a scheduled press conference.
Kozack acknowledged that Pakistan is facing a challenging situation, characterized by stagflation and the impact of various shocks, including severe floods.
The IMF also confirmed that Pakistan had committed not to implement a cross-subsidy program, introduce new tax exemptions, and would maintain a market-based exchange rate for the rupee currency.
Prime Minister Shehbaz Sharif’s proposal in March to charge higher fuel prices for affluent consumers to subsidize prices for the poor was seen as a contributing factor to the delay in implementing the IMF bailout.
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