The International Monetary Fund (IMF) is ready to support Pakistan and the package of reforms is now more important than the size of a new programme, the fund’s Middle East and Central Asia director said on Thursday.
“I think what is important at this stage is to accelerate the reforms, double down on the structure of reforms in order to provide Pakistan with its full potential of growth,” Jihad Azour told a press conference on the sidelines of the IMF 2024 Spring Meetings.
Finance Minister Muhammad Aurangzeb is currently in Washington to attend the spring meetings organised by the IMF and the World Bank (WB).
Aurangzeb stated earlier that Pakistan had initiated discussions with the Fund over a new multi-billion dollar loan agreement to support its economic reform programme, adding that the country will at least be requesting a three-year programme.
Significant rupee devaluation not expected in IMF negotiations
Aurangzeb has stated that the government does not expect significant rupee devaluation as part of negotiations with the IMF, according to a report by Bloomberg.
In an interview with Bloomberg published today, the minister said there would be no reason for the rupee to depreciate more than the range of about 6 per cent to 8pc seen in a typical year.
“Pakistan last devalued its currency in January 2023,” the report noted.
He said that while massive devaluations had accompanied some of Pakistan’s previous IMF loans and are often a condition of the crisis lender’s programmes around the world, nothing comparable should be necessary this time around.
“I don’t see the need for any step change,” Aurangzeb said, citing solid foreign exchange reserves, a stable currency, rising remittances and steady exports. “The only thing which can be a wild card, although in our projections we should be okay, is the oil price,” he said.
He said that the government was looking to bolster industries, including agriculture and information technology, hoping it would help push the nation’s growth above 4pc in the coming years.
The report further said that Pakistan faced about $24 billion in external financing needs in the fiscal year starting July, adding that Aurangzeb said Pakistan was in a “relatively good shape” to make those payments.
He further said that Pakistan expected an IMF mission to visit in May and would like to reach a staff-level agreement on the next loan by the end of June or early July, without specifying how much the country was seeking.
US diplomats reaffirm commitment to bolster ties with Pakistan
Earlier, Aurangzeb also held a meeting with US State Department officials Donald Lu and Elizabeth Horst, during which the latter reaffirmed Washington’s commitment to bolster ties between the two countries.
A statement issued by the finance ministry early on Wednesday said US Assistant Secretary of State Lu, and US Principal Deputy Assistant Secretary and Deputy Assistant Secretary for Pakistan Horst met the finance minister at the WB headquarters in the US capital, “reaffirming Washington’s commitment to bolster Pak-US ties”.
The ministry said that the meeting focused on upgrading economic partnerships, with an emphasis on alternate energy, agriculture, climate resilience and the tech industry.
Aurangzeb briefed the US diplomats about Pakistan’s reform agenda, which includes broadening the tax base, streamlining the energy sector and privatisation.
“Identified American investment opportunities in information technology, renewables, agriculture and minerals extraction. Pakistan pledges close collaboration with US International Development Finance Corporation & Exim Bank for mutual development,” the finance ministry said.
Earlier, the finance minister also met with the WB-IMF Pakistan Staff Association and briefed them about the country’s reform agenda.
The finance ministry said the meeting focused on the expansion of the tax base, energy sector reforms, digitalisation, privatisation, promotion of public-private partnerships, and strict adherence to fiscal discipline to “revive Pakistan’s economy and drive sustainable growth”.
Aurangzeb pledges aggressive reforms at IMF meeting
In a meeting with the IMF chief and some members of its board of governors, the finance minister had reaffirmed Pakistan’s resolve to carry out “aggressive reforms” to stabilise its economy.
These discussions were part of a meeting of Middle East and North Africa (MENAP) ministers and governors with IMF Managing Director Kristalina Georgieva held on Tuesday.
Aurangzeb “underscored aggressive reforms, including broadening the tax net, privatising loss-making SOEs, expanding social safety nets and facilitating the private sector,” his team said in a statement issued a day after the meeting.
The minister underscored the implications of geo-economic fragmentation on Pakistan and expressed gratitude to the IMF, multilateral development banks, and “time-tested sincere bilateral partners” for their unwavering support during these trying times.
He stressed the significance of reallocating a nation’s special drawing rights (SDRs) within the IMF to tackle economic hurdles effectively. Additionally, he highlighted the necessity of reassessing surcharge policies and giving precedence to the IMF’s Resilience and Sustainability Trust (RST) to address climate vulnerabilities.
The IMF’s RST has been in operation for more than a year, with the initial 17 countries securing commitments of financial assistance. Pakistan, identified as a low emitter yet severely impacted by climate change, is also seeking aid from this fund.
Advocating for a more proactive and responsive Global Financial Safety Net to address heightened risks, the minister applauded the IMF’s renewed focus on Capacity Building through Regional Capacity Development Centres (RCDCs).
The minister advocated for a proactive global financial safety net to address heightened risks and appreciated the IMF’s renewed emphasis on capacity-building through regional capacity development centres. He also stressed the importance of collaborative efforts for sustainable economic development.
Pakistan, in pursuit of another long-term package — its 24th thus far — from the IMF, has formulated a comprehensive economic recovery plan. This plan encompasses three primary components: taxation, energy, and streamlining the privatisation of state-owned enterprises (SOEs), including PIA.
The IMF board is scheduled to convene on April 29 to deliberate on releasing the final tranche of its current programme with Pakistan. Subsequently, discussions between IMF staff and Islamabad regarding the new package are anticipated to commence.
During Tuesday’s meeting, the IMF acknowledged Pakistan’s progress in meeting its conditions, while Pakistani officials advocated for a new plan tailored more specifically to Pakistan’s needs.