Cash-strapped Pakistan and the International Monetary Fund [IMF] have failed to reach a clear agreement to unlock crucial bailout funds on the last day of urgent talks in the country, local media said.
However, Pakistan’s finance secretary appeared optimistic late on Thursday that a deal would soon be reached to stave of the bankruptcy, amid soaring inflation and a shortage of raw industry materials.
“An agreement has already been struck with the IMF on prerequisite measures,” Secretary of Finance Hamed Sheikh said, according to private channel Geo News.
“The staff level agreement between Pakistan and IMF will be reached soon,” Sheikh said in a statement to the Reuters news agency. “The IMF mission asked for more time for staff-level negotiations.”
The country’s state television channel quoted finance ministry officials as saying some points still need to be addressed.
However, the IMF delegation were due to fly out of the country on Friday after ten days of talks, state broadcaster PTV said.
Pakistan’s economy is in dire straits, stricken by a balance of payments crisis as it attempts to service high levels of external debt amid political chaos and deteriorating security.
The IMF delegation landed in Islamabad last week to thrash out tough conditions that Prime Minister Shehbaz Sharif called “beyond imagination”.
The latest installments under an already agreed IMF bailout has stalled for months, with the government pleading with friendly nations to help them avoid the painful conditions demanded by the global lender with elections looming.
Analysts have warned that rejecting conditions and pushing Pakistan to the brink would have severe political consequences for the ruling parties, but so will agreeing to IMF measures raising the cost of living.
On Thursday the central bank released fresh data warning its forex reserves had plunged $170 million in a week, standing at just $2.9 billion as of last Friday.
IMF’s conditions
The IMF wants the nuclear armed nation to boost the pitifully low tax base, end tax exemptions for the export sector, and raise artificially low petrol, electricity and gas prices meant to help low-income families.
It is also pushing for Pakistan to keep a sustainable amount of US dollars in the bank through guarantees of further support from friendly nations Saudi Arabia, China and the UAE, as well as the World Bank.
The government had earlier indicated that a deal was close, with Pakistan Energy Minister Khurram Dastgir Khan telling media “I have full hope that these talks will be concluded successfully”.
The world’s fifth most populous nation is no longer issuing letters of credit, except for essential food and medicine, causing a backlog of shipping containers at Karachi port stuffed with stock the country can no longer afford.
Meanwhile industries warned the logjam of cargo would increasingly cause factories to shut, having a cascading effect on employment.
The IMF had been at loggerheads with PM Sharif’s government over unlocking the latest tranche of a draft $6.5 billion package agreed in 2019.
With elections due no later than mid-October, Sharif was wary of ending popular market interventions designed to cushion the cost-of-living crisis for Pakistanis.
However the government finally bowed and loosened controls on the rupee to rein in a rampant black market in US dollars — a step that caused the currency to plunge to a record low — and hiked petrol prices by 16 percent.
Fears of a further price hike have seen hoarding in the country’s largest province of Punjab, pushing minister of state Musadik Malik to report that the government had “no plans to increase the fuel price”.
