The IMF unsatisfied

The failure to reach a staff-level agreement is a product of the Iran-USA-Israel war

The IMF and the government of Pakistan have failed to come up with an assessment of the impact of the Iran-USA-Israel war on Pakistan’s revenue collection. The IMF review team, which had gone to Istanbul from Pakistan, has returned to Washington without reaching an agreement. Another review team is due in May for the budget, and it is hoped that there will be an agreement before that, with the consequent release of the $1 billion tranche under the Extended Fund Facility of $6.6 billion, and a tranche of $200 million under the Resilience and Sustainability Fund. That the IMF has not reached an agreement is bad news, though it reflects more on the IMF than Pakistan, as it is insisting on ignoring the conflict, and sticking to its initial recommendations.

The main problem the IMF seems to have is with Pakistan’s inability, under the fresh challenges of the war, because it wants the primary surplus maintained at Rs 3.15 trillion, which may not be possible. The IMF has also demanded that the petroleum levy not be reduced, which the government wants to do, as a means of avoiding further petrol price hikes, something which it might find difficult to do as the international oil price continues to rise, reaching above $100 per barrel, with analysts predicting tentatively prices of over $150. At that price, the government will not be able to avoid further price hikes. The IMF is also worried about the failure to pass recommended amendments in the Pakistan Sovereign Fund Act, and also demands the reversal of the ECP Act change which allows legislators to prevent their assets declarations from being made public.

The government has clearly reached the crisis point faced by several predecessors, and which have led to the failure of the country to complete so many previous programmes. This has been despite the government having the best will in the world to complete the programme. However, the discussion is no longer about whether this programme will be the country’s last. It is now about whether the programme can be completed at all. Frankly, this is because the IMF is insisting on targets agreed when circumstances were different. The situation is a stark reminder that the IMF is only trying to secure its loan, not help Pakistan tide the present crisis.