Pakistan requires another International Monetary Fund (IMF) programme and assistance from other multilateral lenders beyond the impending election cycle and the current standby agreement, the lender stated in a report released on Tuesday, according to Dawn.

“Resolving Pakistan’s structural challenges, including long-term BOP [balance of payments] pressures, will require continued adjustment and creditor support beyond the current programme period,” stated the Fund in a 120-page report analysing Pakistan’s macroeconomic outlook.

Dawn reported that the assessment is based on the Memorandum of Economic and Fiscal Policies (MEFP), which was signed by Finance Minister Ishaq Dar and State Bank Governor Jameel Ahmed.

Dawn is one of the Pakistani dailies that reports on the country’s Social, Political, and Economic issues.

The report states, “A potential successor arrangement could help anchor the policy adjustment required to restore Pakistan’s medium-term viability and ability to repay.”

“Difficult obstacles”

According to the IMF assessment, Pakistan’s economic challenges are complex and multifarious, and the associated risks are exceptionally high.

“Tackling them necessitates consistent implementation of agreed-upon policies and ongoing financial support from external partners. Consistent and decisive implementation of programme agreements will be crucial for mitigating risks and preserving macroeconomic stability, according to the report.

The lender insists that an additional IMF programme will be required to address structural problems. According to the report, the government has agreed to notify the public whenever electricity rates increase by 5 Pakistan Rupees (PKR) per unit and petrol prices increase by more than 40 percent. According to Dawn, this is because circular debt in the gas sector is now competing with losses in the power sector.

Dawn reported that the government has promised to renegotiate power-purchase agreements with the remaining power producers (including the Chinese) or extend their debt servicing terms.

In the gas sector, the government has committed to providing prompt notification of gas tariff adjustments determined by Ogra, in addition to combining the gas rates for both domestic and imported natural gas using a weighted average tariff.

The government has also pledged to protect the fiscal programme outlined in the most recent budget and other IMF commitments.

Until the formation of a new government following the elections (except in the case of a severe natural disaster), the government will not sanction supplemental grants for any additional unbudgeted spending above the level approved by parliament for the current fiscal year (except in the case of a severe natural disaster).

The government has also “committed not to introduce any new tax amnesties or grant any new tax exemptions in 2023-24, including through the budget or statutory regulatory orders, without the prior approval of the assembly.”

Dawn reported that the government has reached agreements with each province regarding their commitment to achieving an end-FY24 fiscal position consistent with the fiscal year’s general government primary balance goal of PKR 401 billion and maintaining a focus on critically urgent energy sector policies, including not introducing any fuel subsidies or cross-subsidy schemes in FY23 and beyond.

In addition, the government has pledged to ensure monetary and financial stability by reverting to a market-determined exchange rate, bringing inflation closer to the target rate, and rebuilding foreign exchange reserves.

Dawn reported that the statement said the authorities would refrain from providing market participants with exchange rate guidance or preferences and from regulating the demand for foreign currency through administrative action.

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The authorities have committed to maintaining the average premium between interbank and open market rates at no more than 1.25 percent and no less than minus 1.25 percent during any consecutive five business day period and to publishing daily interbank and open market exchange rates.

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Thursday, Jaishankar spoke at the annual Asia Economic Dialogue organised by the external affairs ministry in Pune “This particular relationship (India-Pakistan) has a fundamental problem that we cannot and must not ignore. And that problem is terrorism, because as soon as you begin to circumvent that…”

“And we must not be in denial of the relationship’s very fundamental flaws. And just as a country must address its economic issues, it must also address its political issues. A nation must also address its social issues. No nation will ever emerge from adversity and become a prosperous power if its primary industry is terrorism “he added.

Notably, Pakistan’s economy is in disarray, and the country is currently holding virtual negotiations on the Memorandum of Economic and Financial Policies (MEFP) in order to reach an agreement at the staff level.

He also stated that it is in no one’s best interest for any nation, least of all a neighbouring nation, to experience severe economic problems. However, if a nation experiences severe economic difficulties, it must make policy decisions and governance decisions in order to recover.

“There is no doubt that Asia’s influence or importance will grow. Asia is expanding because Asia has been global; however, we should not fall for the rhetoric “Asia for Asians,” which is deceptive and appeals to primitive chauvinism. It genuinely demonstrates a profound strategic intent “Jaishankar stated during his press conference.

During the occasion, Jaishankar also discussed the ‘Neighbourhood First’ policy, the global situation, and India’s G20 Presidency.

Jaishankar stated, “If I were to choose the three most important issues on my mind, one of them would be our neighbourhood, in part because the three of us live there.”

Jaishankar, Lyonpo Namgay Tshering, Finance Minister of Bhutan, and Ibrahim Ameer, Finance Minister of the Maldives, conversed during the Inaugural Session of the Dialogue.

The Asia Economic Dialogue (AED) is the Ministry’s premier annual geoeconomics event, co-hosted with Pune International Centre.

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The seventh edition of the AED will be conducted in Pune from February 23-25, 2023. “Asia and the Emerging Global Order” is the primary focus of the Dialogue. The Dialogue will also cover topics such as Global Growth Prospects, How the Global South Will Influence the G20 Agenda, the Metaverse: Understanding the Future, and Reaching Climate Targets: The Way Forward, according to a Ministry of Foreign Affairs press release.

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Minister and PML-N leader Khwaja Asif, speaking at a convocation in Sialkot, stated that people must have heard that Pakistan has defaulted and that there is a (economic) catastrophe, which is accurate.

Even bread and water were experiencing record-high inflation when the minister made his statement. Asif stated that Pakistan had “already defaulted” and not been in default.

“We are citizens of a bankrupt nation. People have been claiming that Pakistan has defaulted and that there is a (economic) meltdown, but this has already occurred and we must rise up “Asif stated.

Defence Minister of Imported govt admits that Pakistan is already in default. In 10 months they have brought Pak to this sorry state – Shameless lot selling out the country & holding on to power instead of letting nation choose their ldrs thru elections. pic.twitter.com/IHbREnbAhK

— Shireen Mazari (@ShireenMazari1) February 18, 2023

During the ceremony held at a private college, Khwaja Asif criticised the previous PTI government led by Imran Khan for fomenting terrorism and allowing the problem to return to Pakistan. According to reports, he further said that Imran Khan had created a plan that made terrorism Pakistan’s destiny.

Speaking on the ongoing issue in the country, he said that Pakistan possessed the solution to the problem and that the country was insolvent. “However, we are seeking assistance from the IMF,” he stated.

A video showing Khwaja Asif revealing Pakistan’s insolvency has gone viral, and members of the Opposition, especially the PTI (Pakistan Tehreek-e-Insaf), have been quick to criticise the ruling PML-N. In only ten months, Prime Minister Shehbaz Sharif allegedly pushed Pakistan to a “sad state.”

In 2019, Pakistan obtained a 6 billion dollar IMF bailout. In 2022, an additional USD 1,1 billion was added to the fund to assist the country following the severe floods. In November, however, the IMF froze payouts due to Pakistan’s failure to make additional fiscal consolidation progress amid the country’s political uncertainty.

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With less than three weeks’ worth of import cover, the existing foreign exchange reserves of Pakistan are considered to be on the verge of exhaustion.

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After the International Monetary Fund delayed the release of a crucial USD 1.1 billion portion of a 2019 deal worth USD 6 billion, on hold since December due to Pakistan’s failure to meet the terms, economists and political analysts are pessimistic. The IMF advised Pakistan to raise taxes Friday after the latest round of talks.

“The imposition of more taxes means tough days are ahead for the majority of the people in Pakistan who are already facing higher food and energy costs, but there is no other way out if Pakistan needs the IMF loans, and Pakistan desperately needs it,” said veteran economist Ehtisham-ul-Haq.

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The IMF-Pakistan talks stalled, hurting Prime Minister Shahbaz Sharif, who is trying to avoid a default amid a worsening economic crisis and rising militant violence. Pakistan is still recovering from record-breaking summer 2022 floods that killed 1,739 people and destroyed 2 million homes.

At a UN-backed conference in Geneva in January, dozens of countries and international institutions pledged over USD 9 billion to help Pakistan recover and rebuild from devastating summer floods, but economists and Pakistani officials say those funds will be given for projects, not cash.

Since then, Pakistani Finance Minister Ishaq Dar has said his experts were preparing to raise taxes and cut electricity, gas, and other subsidies to meet the deal’s terms.

The economist Haq predicted that new taxes would raise Pakistan’s inflation rate from 26% to 40%. “Life will become more difficult for the common man if Pakistan fails to revive the IMF bailout without any further delay,” he said in an interview.

Officials say China, Saudi Arabia, and the UAE had promised Sharif’s government financial assistance, but they also wanted Pakistan to finish the 2019 IMF programme.

Senior Pakistani political analyst Imtiaz Gul predicted Sharif’s government would raise taxes on taxpayers.

“We need to broaden the tax base,” he said, but “raising taxes will trigger an increase in the prices of all essential items.”

The government promises to avoid hurting the poor with new taxes. The government said it would tax the wealthy to save the economy.

Pakistan’s foreign exchange reserves dropped to slightly over USD 2 billion. That covers 10 days’ imports. Pakistan-IMF talks are expected to resume Monday or Tuesday. Sharif warned last week that Pakistan would struggle to meet IMF requirements.

Since April’s no-confidence vote ousted Sharif, Imran Khan, the opposition leader, has warned that Pakistan’s economic crisis could lead to a Sri Lanka-like situation. If Pakistan defaults soon, the world could blackmail it over its nuclear programme, he has warned.

Khan claims Washington overthrew his government, which Washington denies.

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On the other hand, according to Dawn, the Pakistan Petroleum Dealers Association (PPDA) has accused all Oil Marketing Companies (OMCs) of failing to secure adequate supply in response to demand, leaving the pumps empty and forcing motorists to stop for petrol in metropolitan areas.

The OMC Association of Pakistan (OMAP), which disagreed with the claim, claimed that some gas stations were storing fuel and fabricating shortages in order to boost sales in anticipation of the upcoming increase in gas prices.

The government is unable to manage petrol shortages and supplies, leading to financial losses for businesses and consumers. It's time to hold them accountable and demand better management of fuel supply and prices. #petrolshortage #financiallosses #Pakistan pic.twitter.com/AiFDgi0Ejj

— Dr Amjad Ch (@DrAmjadOfficial) February 10, 2023

According to Dawn, several gas stations in Punjab’s main and small cities have been forced to close due to severe gasoline shortages brought on by the state of the economy.

The situation seems to be the worst in a few major cities, like Lahore, Gujranwala, and Faisalabad, where multiple gas stations are allegedly operating for days on a meagre or nonexistent supply of gasoline due to pressure from the oil marketing companies (OMCs).

“Around 70 of the 450 pumps in Lahore are not working. Shahdra, Wagah, Litton Road, and Jain Mandar are some of the locations where the gas stations are closed due to a lack of fuel “Khawaja Atif, the information secretary for the Pakistan Petroleum Dealers Association, informed Dawn.

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According to local media, there is a major lack of gasoline in various Pakistani cities amid Pakistan economic crisis. Most of the petrol stations are closed. There aren’t many open and those that are only sell a small amount of gasoline. There are protracted lineups of automobiles and bicycles at some fueling stations.

Notably, a spiralling economic crisis and currency depreciation have put Pakistan’s oil firms on the edge of “collapse.”

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