Pakistan on Wednesday assured the United States that it remained committed to the International Monetary Fund (IMF) programme, as the country’s reserves slipped to just half a month import cover after making a fresh debt repayment of $500 million.
Finance Minister Ishaq Dar met Robert Kaproth, Deputy Assistant Secretary of the US Department of the Treasury for Asia, according to an official announcement by the Ministry of Finance.
During the meeting both sides discussed the status of the IMF programme. Dar briefed the US official about the measures that Pakistan was taking to revive the IMF programme.
“Despite challenging economic conditions, the government is focusing on fixing things in the right direction and introducing reforms in all sectors including energy sector and capital market to achieve economic growth and development,” Dar told Robert.
The IMF has asked Pakistan to implement a market-based exchange rate, lift restrictions on imports, increase taxes and electricity prices. However, so far, the government has not yet taken any of these measures and is waiting for a formal engagement with the global lender before kicking in these actions.
The meeting took place amid a steep decline in the foreign exchange reserves, which slip to the lowest level in over nine years to just two weeks equal import cover.
Pakistan this week made a payment of $500 million to a Chinese commercial bank that has now pulled down the reserves to a level that cannot be described comfortable by any standards.
Pakistan’s monthly import bill is around $5.3 billion and the reserves were below $3.3 billion on Tuesday. Pakistan is expecting some disbursements by Chinese financial institutions soon, as it also awaits the $2 billion Saudi cash deposit “much before end of January”.
Prime Minister Shehbaz Sharif last week gave a direction to the Ministry of Finance to revive the IMF programme at the earliest with the caveat that the low income groups should be spared from the burden that will have to be borne by the nation in due course.
The finance minister told the US deputy assistant treasury secretary that Pakistan would fulfill its international debt obligations and because of that reason it did not opt for Paris Club debt restructuring. Dar also stated in the meeting that Islamabad had made timely debt repayments.
The finance minister in the past sought the US help to soften the position of the IMF but the world’s biggest economy advised Pakistan to adopt the path of fiscal discipline.
The government officials said that the finance minister was of the view that the rupee-dollar parity was under pressure due to smuggling of currency to Afghanistan and Iran.
Member Customs Operation of the Federal Board of Revenue, Mukarram Jah, told The Express Tribune this month that the role of the smuggling in rupee devaluation was only 10%.
Unlike market expectations, the rupee-dollar parity did not move much on Wednesday and the local currency closed below Rs231 to a dollar.
The US deputy assistant treasury secretary seemed to be on a reconnaissance visit to find out the reasons behind the country’s boom and bust economic cycles and its commitment to the IMF programme.
Senior macroeconomist for the Department of Treasury for Pakistan Eva Ghirmai and Financial Attaché’ Larita Bolden also accompanied the US deputy assistant secretary.
Dar was assisted by Minister of State for Finance Dr Aisha Pasha, Special Assistant to PM on Finance Tariq Bajwa and Finance Secretary Hamid Sheikh.
Dar briefed Robert about the economic outlook of the country and informed him that the present government inherited weak economic legacy, the finance ministry handout stated.
He said that due to “pragmatic measures taken by the government, the country is destined for progress and development,” according to the finance ministry.
The finance minister also informed the US delegation that the government wanted to fix the economy to the right path while fulfilling its international obligations.
He also shared with Kaproth damages caused by the floods in Pakistan and its impact on the economy of the country.
“He (Dar) stressed that the government is handling all challenges with complete commitment,” the finance ministry said.
Kaproth underscored good relations between Pakistan and the US and expressed confidence in the policies and programmes of the government for economic and financial stability.
He extended his support and cooperation on economic and financial issues.