Pakistan’s Finance Minister Ishaq Dar during his talks with US Treasury Department Deputy Assistant Secretary for Asia Robert Kaproth in Islamabad. Image Credit: PID

Islamabad: Pakistan is reportedly seeking US support in reviving the stalled IMF programme as the country urgently needs external financing to support the battered economy.

Pakistan’s finance minister Ishaq Dar held a meeting with a visiting United States delegation and told them that the government was doing its best to set the economy on a positive trajectory and would continue to fulfill its international financial obligations.

“Despite challenging economic conditions, the government is focusing on fixing things in the right direction” Finance Minister Ishaq Dar was quoted as saying.

The US delegation was led by the deputy assistant secretary of the US Department of Treasury, Robert Kaproth, and included macroeconomists and other US officials including senior macroeconomist for the US treasury department for Pakistan Eva Ghirmai and financial attaché Larita Bolden.

The Pakistani side included the state minister for finance and revenue Dr. Aisha Ghous Pasha, special assistant to PM on finance Tariq Bajwa, secretary finance, and senior officers from the finance division.

Dar said that despite the difficult situation, the government will be introducing reforms in all sectors including the energy sector and capital market to achieve economic growth. He apprised the US delegation of the government’s economic priorities to fix the economy while fulfilling its international obligations.

Pakistani media reported that the meeting was part of efforts to convince the Washington-based global lender IMF to release $1.1 billion and revive the stalled programme. Pakistan entered the $6 billion IMF programme in 2019, which was raised to $7 billion this year. Pakistan will get $1.18 billion after the programme’s ninth review, which is currently pending.

Govt ready to comply with IMF conditions

The meeting comes after the Pakistan government indicated that it was willing to comply with all tough conditions set by the IMF for the next tranche of the bailout package and requested the global lender to send its mission to Islamabad soon to conclude a long-awaited agreement. The major IMF conditions include a market-based exchange rate, an increase in electricity and gas prices, and additional taxes to contain the fiscal deficit. Pakistan is seeking a crucial installment of $1.1 billion from the IMF to avoid the possibility of a sovereign default. With interest rates at 17%, inflation hitting 24.5% in December, and foreign reserves barely enough to cover three weeks of imports, Pakistan is in urgent need of external financing.

Sharp decline of Pakistani rupee

Pakistani currency plunged to a historic low of Rs255.43 against the United States dollar in the interbank market on Thursday. On January 25, the rupee closed at Rs230.89 against the greenback but on January 26, the currency witnessed massive depreciation of around 10 percent in the interbank market after the unofficial cap on the currency was removed. Before the removal of the cap, Pakistani markets had three different rates — the central bank’s official rate, the rate by the foreign exchange companies, and the black market rate.

Pakistani finance minister Ishaq Dar has been widely criticized for the dollar peg, also called “Dar Peg” in Pakistan. Ishaq Dar fixed the interbank rate, keeping the value of the dollar artificially low which led to a widening gap in official and open market rates, encouraging the black market and causing a huge decline in remittances sent through banking channels.

Pakistani currency sharply devalued from Rs177 in March 2022 to more than Rs255 in the interbank in January 2023. Experts say the rupee’s decline and a market-based exchange rate indicate that Pakistan was close to securing the IMF loan.