Pakistan plans to dump IMF in near future

Tarin says govt will raise $1 billion by floating Euro Bonds next month: Believes 5% to 6% sustainable growth may rid country of Fund’s dependence

By: News Desk
Published: 02:56 PM, 3 Feb, 2022
Pakistan plans to dump IMF in near future
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The government is planning to raise more dollars after selling $1 billion Euro Bonds next month in anticipation of achieving a sustainable economic growth and thus ending its reliance on the IMF programme, reported 24NewsHD TV channel on Thursday.

This was stated by Finance Minister Shaukat Tarin in an interview with Bloomberg. He was of the view that the IMF programme should be enough now. He said if Pakistan achieved 5% to 6% economic growth, then he would not think that Pakistan needed another IMF programme. 

During a period of over half a century, Pakistan resorted to the IMF and sought almost 20 bailouts from it. But now it wants to end its dependence on the global lender by slashing its deficits and tapping capital markets in order to attain sustainable economic growth

“I think this programme should be enough,” Tarin, 68, said in an interview to Bloomberg in Islamabad. “If we start generating 5%-6% balanced growth, which means sustainable growth, then I don’t think we need another IMF programme.”

The government’s commitment to have an IMF-free future comes after the revival of $6 billion loan programme by the Fund yesterday, which had been put on hold since 2019 as Pakistan took steps to meet the loan conditions.

Prime Minister Imran Khan has also been critical of the IMF loan and have stated “the begging bowl needed to be broken” if Pakistan is to command respect in the world. 

In his interview, Tarin said that he plans to raise $1 billion via an ESG - compliant Eurobond in March, which would follow a similar amount of Sukuk last week.

The first part of Tarin’s plan involves enhancing exports. The central bank offered cheap loans to manufacturers and energy tariffs were brought in line with the region. Textile shipments -- more than half of total exports -- are poised to surge 40% to a record $21 billion in the year through June and further to $26 billion next year, according to Khan’s commerce adviser. 

Also Read: IMF warns inflation to pick up in Pakistan

The government also plans to extend similar incentives to the technology sector as it seeks to ride a wave of global venture-capital interest in startups. The policies could be unveiled in about a month, Tarin said. 

Since his appointment in April 2021, Tarin renegotiated some of the IMF’s financial conditions, including a smaller increase in utility prices and lower mop up in taxes than the Fund had earlier insisted on. 

The government has adopted some of the structural conditions, which include increasing autonomy for the central bank and putting an end to deficit monetization. Like predecessors, Tarin hasn’t been able to significantly broaden Pakistan’s tax base or sell loss-making state-run firms. 

Also Read: Pakistani rupee hammers US dollar to fall below Rs176 mark

Previous governments accepted IMF conditions in the short term and, when the programme ends, policy makers revert to profligate spending, Tarin said. Instead, he vowed to “control our expenses” in the upcoming budget.

“We are trying to now take those steps, which are going to put this economy on an inclusive and sustainable growth path,” said Tarin. “Once it gathers momentum and is sustainable, then I think we will probably see 20-30 years of growth.”