IMF agreement won't lessen default risk: Pak ex- finance minister

Amid severe economic crisis, Pakistan has completed all the prior actions needed for staff-level agreement (SLA) with the International Monetary Fund (IMF) to avert sovereign default and secure long-delayed $1.2bn disbursement and to counter the record inflation, the State Bank of Pakistan has now hiked the key policy rate by 300 basis points to 20 per cent. With this, Pakistan’s key interest rate has hit its highest level in 27 years. Former finance minister Miftah Ismail has slammed the policy of artificially managing the dollar rate, saying that it was "not a serious economic policy but a joke with the economy". He said that the first thing that needs to be done is to secure the deal with IMF. He also added that there is a need to increase the average wage of workers so they can survive this inflation.

Ismail has stated that the risk of Pakistan defaulting would not be lessened even if an agreement with the International Monetary Fund (IMF) is reached. Miftah said that there was a “trust deficit” between the IMF and the finance ministry which could be bridged by the prime minister having a dialogue with other nations. He furthered that some structural changes must occur, such as, an increase in taxes and a reduction in expenditures. The former finance minister said the IMF's forecast of Pakistan’s current account deficit reaching $8 billion is "unfair". He also added that the friendly countries were angry with Pakistan as it does not do what it says.

According to Dawn report, the IMF tranche had been delayed since October last year because of the government’s reluctance to allow free movement of the exchange rate, increasing the interest rate and full-cost recovery of power supply through additional surcharges and other adjustments to generate more than Rs600bn in less than two years.  The two sides were now jointly working to finalise the text of the Memorandum of Economic and Financial Policy (MEFP) and targets for the programme implementation that could be presented to the IMF’s executive board for approval, report said.