By Ashraf Khan
The IMF will send a team to Pakistan next week to discuss reviving a desperately needed bailout programme, with a foreign exchange crisis bringing imports almost to a standstill.
The South Asian nation is in dire economic straits servicing endless external debts, battling rising inflation and with only enough dollars for around three weeks of imports.
The IMF said in a statement late Thursday that a review team will arrive in the capital Islamabad on Tuesday in a bid to break the deadlock over releasing more financial aid.
It comes days after Islamabad bowed to pressure to remove an exchange cap to help control a rampant black market. Its removal saw the rupee plummet to a historic low against the US dollar on Thursday.
Mohammad Sohail, financial analyst and CEO of Topline Securities, said the government had cleared a big hurdle in securing the next IMF instalment.
“Leaving the forex market to market forces was one of the biggest conditions of the IMF, which the government was defying in the past,” he told AFP.
Prime Minister Shehbaz Sharif said Friday he was hopeful of an agreement this month.
“Pakistan today stands at a crossroad where we are striving to save each penny,” he said at an event in the capital, adding that a priority list for imports has been set up.
The state bank, which has refused since the start of the month to issue letters of credit in almost all instances other than food and pharmaceutical imports, overnight reported that reserves had fallen again to a near-nine-year low of $3.7bn.
The tumbling economy mirrors political chaos, with former prime minister Imran Khan heaping pressure on the weak coalition government and calling for elections that are due no later than October.
Khan, who was ousted last year in a no-confidence motion, brokered a multi-billion dollar loan package from the International Monetary Fund (IMF) in 2019.
But Khan reneged on his promise to cut subsidies and market interventions that had cushioned the cost-of-living crisis, causing the programme to stall.
It was briefly revived under Sharif but he has also been reluctant to meet loan conditions amid falling popularity.
Sharif called earlier this month for the IMF to give Pakistan breathing space as it tackles a “nightmarish” situation, with thousands of shipping containers held up at Karachi port.
Pakistan is still recovering from devastating floods and battling a major energy shortage that has caused factories, including in the crucial textiles export market, to partially shut down.
A nationwide electricity outage this week that lasted more than 12 hours was linked to a cost-cutting measure, estimated to have cost the textile industry alone $70 million.