COAS urges US to intervene for early release of IMF loan
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Chief of Army Staff General Qamar Javed Bajwa has reached out to Washington to request help in securing an early loan dispersal from the International Monetary Fund, Nikkei Asia has reported, as dwindling foreign reserves spark a scramble in Islamabad to avoid a default.
According to Nikkei Asia, Gen. Qamar Javed Bajwa spoke by phone with U.S. Deputy Secretary of State Wendy Sherman in a highly unusual move earlier this week, according to sources from both the U.S. and Pakistan.
The sources, who requested anonymity because they were not authorized to speak publicly, said Bajwa made an appeal for the White House and Treasury Department to push the IMF to immediately supply nearly $1.2 billion that Pakistan is due to receive under a resumed loan program.
The IMF already granted Pakistan "staff-level approval" for the loan in question on July 13. But the transaction -- part of the IMF's $6 billion Extended Fund Facility for Pakistan -- will only be processed after the multilateral lender's executive board grants final approval.
The IMF is going into recess for the next three weeks and its board will not convene until late August. No firm date has been set for announcing the loan approval for Pakistan, according to an IMF official who also spoke on condition of anonymity.
For Islamabad, time is of the essence as Pakistan rupee is falling freely against US dollar in interbank trading.
Without an immediate lifeline, the inflation-ravaged Pakistani economy will continue to hemorrhage. The rupee has been plummeting against the dollar, and the country has less than $9 billion in foreign reserves left, covering under two months of import bills. On Thursday, S&P Global downgraded Pakistan's outlook to negative from stable.
According to the IMF official, there is a major difference between staff-level approval and board approval. "Our stakeholders, the countries that take the vote as to whether they are supporting this or not, make the final decision," said the official. "This is a difference. So the legally binding step is a board approval, not the staff level agreement."
The U.S. is the largest shareholder in the fund, founded in 1945. While Washington has voted for funding Pakistan in the past, the Trump administration openly expressed its reservations about the country using IMF loans to pay back China.
With comparisons being drawn to Pakistan's crisis-plagued neighbour Sri Lanka, the stakes of default for the nuclear-armed Islamic republic are higher. Pakistan has a massive population of over 220 million; has borders with China, India, Iran and Afghanistan; is fighting terrorists; and sits on the intersection of the Persian Gulf and the Indian Ocean.
Bajwa's appeal comes in the wake of separate meetings between senior civilian Pakistani and American officials in July, none of which managed to negotiate an early disbursement of funds.
"Several senior Pakistani officials have met with U.S. and other key stakeholder nations in the IMF and World Bank in the past week to register concerns about the timing of IMF Executive Board decisions, pressing to expedite review of Pakistan's progress on prior actions," said an official familiar with the proceedings.
According to sources, the lack of progress in those meetings spurred Gen. Bajwa to get Washington's attention when other emissaries could not deliver.
Pakistan is one of the world's most bailed-out countries. Since 1958, the country has embarked on 22 separate IMF programs but completed just one. That was in the 2000s, when it was being ruled by a military regime.
As the rupee continued to touch all-time lows -- its worst performance since 1998, when Pakistan tested nuclear weapons and lost investor confidence -- it was not immediately clear if Gen. Bajwa had managed to convince the U.S. administration.
However, while officials familiar with the exchange admitted that the currency and foreign reserves situations were worrisome, they also reported progress on the IMF finance facility. "If the government can get through this tough month, there are good opportunities to stabilize the economy, but August will not be easy," one official said.
Meanwhile, in public, the governor of Pakistan's central bank has insisted that the fear of default is overblown. Gov. Murtaza Syed has told media that financing needs for the next 12 months will be met. He has admitted that Pakistan would rather get the IMF funding sooner rather than later, but also detailed that Islamabad is negotiating with Saudi Arabia and China -- two countries that Gen. Bajwa visited recently -- to score supplemental financing.