The International Monetary Fund (IMF) has made it clear that Pakistan’s timely finalization of a recovery plan from devastating floods is essential to support discussions and continued financial support from multilateral and bilateral partners.
The incumbent government has failed to finalise the flood recovery plan so far which has resulted in delay in the disbursement of its next loan tranche. Though the finance ministry said last week that it would “expeditiously” finish the technical engagement with the IMF as part of the ninth review of the programme, but a firm date for the review completion is yet to be announced.
IMF’s resident representative Esther Perez Ruiz said that talks were ongoing with the Pakistanis on reprioritising and “better target support towards humanitarian needs while accelerating reform efforts to preserve economic and fiscal sustainability”.
This stance is significant, and will likely enhance market anxiety regarding Islamabad’s ability to meet its external financing requirements and debt payments amid dwindling foreign exchange reserves. There’s no doubt that the lender of the last resort has every right to ensure that loan conditions are followed in a timely manner as implementation of most of the reforms it has proposed is crucial for an early and durable economic revival. Yet it should show some flexibility with a view to helping this country get back on its feet.
Pakistan is hoping that global donors will fund our proposed plans to fight the climate change impact on and damage to the economy with $13bn in flood aid over the next three years. Overall, the government has worked out a funding requirement of $40bn over 10 years. If the world’s lacklustre response to the UN’s repeated calls for funds to help Pakistanis affected by the floods, as well as the unusually harsh stance taken by the Fund, are any guide, this money is unlikely to materialise.
The funds from the IMF and the Climate Change Fund will be a lifeline for Pakistan, which is struggling to convince international markets and ratings agencies that it has the funds to meet external financing requirements, including debt repayments.
