The IMF is making it difficult for Pakistan, which is in the midst of a crisis, to unlock a stalled bailout package because the lender has proposed a new requirement before signing a staff-level agreement.
Written assurance
The US-based financial institution has now demanded a written guarantee of financing from friendly nations, including Saudi Arabia, Qatar, and the United Arab Emirates by June 30. This is after placing extremely strict conditions on bailout funds.
The government insisted that the executive directors of the KSA and other countries at the International Monetary Fund would provide a written assurance. In this regard, the Finance Ministry and the PM House discussed how to obtain a written guarantee from these countries.
Nearly all of the lender’s requirements have been met by the cash-strapped nation, including raising power and gas prices and enacting a mini-budget that included Rs200 billion in taxes.
IMF Pakistan
According to experts, Pakistan’s political climate has contributed to the postponement of an agreement with the International Monetary Fund (IMF) that could stabilize the country’s economy.
Global lenders, including the IMF, reportedly want guarantees from Pakistan that the country’s future political structure will uphold any agreements they reach with Islamabad. For months, Pakistan and the IMF have been trying to come to an agreement on restarting a $7 billion installed programme.
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Islamabad concurred with the lender’s most recent request that it refrain from obtaining direct loans from commercial banks.
Pakistan will sign the staff-level agreement in the coming days, according to Prime Minister Shehbaz Sharif, despite the ongoing delay. According to experts, political unrest in South Asian countries has become a major factor in the delay of a crucial agreement that could stabilize the economy. Although negotiations have gone on for months, no agreement has been reached.
Background of IMF
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
Formed in 1944, started on 27 December 1945, at the Bretton Woods Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes, it came into formal existence in 1945 with 29 member countries and the goal of reconstructing the international monetary system. It now plays a central role in the management of balance of payments difficulties and international financial crises.
Countries contribute funds to a pool through a quota system from which countries experiencing balance of payments problems can borrow money. As of 2016, the fund had XDR 477 billion (about US$667 billion). The IMF is regarded as the global lender of last resort.
