Funds to be released in three years, says Hafeez Shaikh
Pakistan is set to receive $6 billion in three years as it has finalised its agreement with the International Monetary Fund, Adviser to Prime Minister on Finance, Revenue, and Economic Affairs Dr Abdul Hafeez Shaikh announced on Sunday.
He said that the confirmation for the deal will be given by the IMF board.
“The Pakistani authorities and the IMF team have reached a staff-level agreement on economic policies that could be supported by a 39-month extended fund arrangement for about $6 billion. This agreement is subject to IMF management approval and to approval by the executive board, subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments,” said the monetary fund in a statement.
Many other organisations such as the Asian Development Bank, and the World Bank will give Pakistan a loan worth $2 billion to $3 billion too, he remarked while speaking on the state-run PTV News. “The money will help improve our debt situation.”
When asked why Pakistan chose to opt for an IMF bailout package, Shaikh said that the international organisation helps its member countries when they are in any economic difficulty. “We all know that Pakistan’s economy was not in a good shape with the new government took over,” he remarked. We had debt worth Rs25 trillion loan, our exports have increased zero percent in the last few years, there was no foreign investment, and the difference between our exports and imports was Rs25 billion. “Our reserves, in two years, fell and come down to Rs9 billion.”
He said that seeking an IMF package was “unavoidable” because of Pakistan’s financing need.
The adviser was hopeful that Pakistan’s package with the IMF will give a “good message” to future investors.
On the IMF’s strict conditions, he said that some of those are in favour of the country. “It is in our interest for IMF to say that we should spend money according to our needs and to tax the rich so we can sustain our economy.”
He remarked, “we want to improve the quality of life and for that some structural changes are necessary.”
Previously, the structural changes weren’t followed with the aggression that was needed, Shaikh said. “We have to improve our fiscal situation and for that, we will have to increase prices.”
The PTI-led government firmly believes that it does not want to burden people, he said. To help the people, the government will take different measures to ensure that the burden of inflation does not fall on the poor. “We have decided that if the prices of electricity are increased, then there will be no effect on the people who use 300 units. We have reserved funds worth Rs50 billion for this.” The government has also reserved Rs180 billion for the social safety net.
“We don’t have to put a lot of pressure on the people,” he added.
Shaikh didn’t have a clear answer if this is the last time Pakistan is seeking a bailout package from the IMF. “It all depends on how successfully we implement the structural changes,” he said.