Pakistan secures deal for $6b IMF bailout

Pakistan and the International Monetary Fund, or IMF, have reached an agreement, securing a $6 billion bailout for the South Asian country, officials said on Sunday, following months of painstaking negotiations between the two sides, Agence France-Presse reported.

According to The Associated Press, Pakistan and the international lender reached a "staff level agreement" subject to approval by the IMF management and the executive board, IMF envoy Ernesto Ramirez Rigo said in a statement.

The agreement marks Pakistan's 22nd bailout from the IMF, as the country struggles to stave off a looming balance-of-payments crisis while its economy teeters due to low growth, soaring inflation, and mounting debt.

According to Abdul Hafeez Shaikh, an economic adviser to Pakistani Prime Minister Imran Khan, the country is set to receive $6 billion from the IMF in addition to $2 billion to $3 billion from the World Bank and Asian Development Bank over the next three years.

"We have a $12 billion gap in our annual payments and we don't have the capacity to pay them," Sheik said in a televised address as he announced the new deal with the fund.

According to Xinhua News Agency, the deal still needs approval from the IMF board of directors in Washington, but it shows that effective reforms are underway in Pakistan, the adviser said.

A news release from IMF Mission Chief for Pakistan Ernesto Ramirez Rigo also confirmed that Pakistan could be supported by a 39-month Extended Fund Arrangement for about $6 billion.

Analysts have warned that any fresh IMF deal would likely come with restrictions that could hobble Khan's grand promises to build an Islamic welfare state, as the country is forced to tighten its purse strings, AFP said.

Battered economy

The deal with the IMF came weeks after Sheikh, a former World Bank official who was Pakistan's finance minister from 2010-13, was appointed as an "adviser on finance" after Finance Minister Asad Umar resigned amid a wide-ranging cabinet reshuffle.

A government report published on Friday noted that Pakistan's growth rate is set to hit an eight-year low, with the country's GDP rate likely to sink to 3.3 percent against a projected target of 6.2 percent.

Pakistan has had 21 bailouts since it joined the IMF in 1950. Its most recent loan was issued in 2013, worth $6.6 billion.

The United Arab Emirates, Pakistan's largest trading partner in the Middle East and a major investment source, recently offered $3 billion to support the battered economy.

Islamabad also secured $6 billion in funding from Saudi Arabia and struck a 12-month deal for a cash lifeline during Khan's visit to the kingdom in October.

However, the influx of Gulf cash failed to reverse the economic headwinds battering Pakistan, as high fuel prices, low tax yields, and rising inflation have kept the country off balance, AFP reported.

(China Daily 05/14/2019 page11)