The approval process for Pakistan’s IMF program has hit substantial roadblocks, causing concern and uncertainty across various sectors. Despite swift staff-level agreement and the government’s optimistic expectations, the board’s approval has encountered complications, with potential delays until the end of September and beyond.
The primary issue revolves around the unresolved gross financing gap, as the government has only secured a fraction of the necessary commitments, leaving a substantial amount pending. This delay is prompting unease, impacting foreign investors’ confidence in the government’s market-based debt and casting doubt on the promised macroeconomic stability and economic growth.
Moreover, strained relations with China over Independent Power Producers’ debt reprofiling have added to the complexity. Discussions stalled during a recent visit to China, raising concerns about the government’s strategy and creating reluctance from the Chinese to assume more risk without clarity on a sustainable path forward.
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In response to the challenges, the government is seeking additional support from GCC countries but has so far faced shortfalls in meeting the required financing. The situation is further exacerbated by high rates demanded by commercial banks, adding burden to debt-servicing costs and straining the external sector.
These developments also question the IMF’s assumptions about private credit inflows, and there are fears that persistent deadlock may lead to a reversion to restrictive import policies, further impacting economic stability.
The urgency of the situation cannot be overstated, as every delay erodes confidence and jeopardizes the fragile economic stability crucial for Pakistan’s growth.
