The International Monetary Fund has said that Pakistan has not approached it to begin negotiations for a possible bailout to stem a balance of payments crisis, hours after Islamabad announced it will enter talks.
On October 8, Prime Minister Imran Khan had given a green signal to approach the IMF for a bailout package.
Finance Minister Asad Umar said that the country has no choice but to go to the IMF. “We will have to take a loan to support the falling economy.” The minister said that Pakistan will have to take tough decisions to fix the economy.
“We have not been formally approached yet,” said Maurice Obstfeld, the IMF’s top economist, during the fund’s annual meeting in Bali Tuesday.
The IMF’s comments added to the appearance of confusion around the abruptly announced decision.
“We will be listening very, very attentively when and if they come to us,” said Obstfeld.
“Pakistan is suffering from a number of imbalances: A very large fiscal imbalance. A large current account imbalance. They also have a low level of reserves and a currency that is too rigid and overvalued,” he added.
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For weeks analysts have warned that a new current account crisis could undermine Pakistan’s currency and its ability to repay billions in debts or purchase imports.
Pakistan has gone to the IMF repeatedly since the late 1980s. The last time was in 2013, when Islamabad got a $6.6 billion loan to tackle an economic crisis. However, there are fears that the terms of any new loan will be more stringent than those in 2013, due to tense relations with the US, the lender’s biggest donor.
In July, US Secretary of State Mike Pompeo voiced concerns over any IMF bailout being used to repay Chinese loans to Islamabad.
“There’s no rationale for IMF tax dollars — and associated with that, American dollars that are part of the IMF funding — for those to go to bail out Chinese bondholders or China itself,” Pompeo told US television station CNBC.