Exclusive: Embattled Shehbaz claims political uncertainty not a hindrance in IMF talks

On a day of significant political setbacks for the incumbent PDM government in the center, Prime Minister Shehbaz Sharif insisted that the raging political uncertainty in the country was not causing any problems in negotiations between Pakistan and the International Monetary Fund (IMF). 

Responding to a question during a meeting with office bearers of the Council of Pakistan Newspaper Editors (CPNE), the prime minister rejected recent reports in the media claiming the deal with the IMF had been delayed because of continuing political uncertainty. However, the premier went on to say that Pakistan had accepted the ‘harshest’ of demands set by the IMF and that the deal was 2-3 days away. 

The mantra of “just around the corner” has been repeated ad nauseam by the federal government over the past two months since a delegation of the IMF left Pakistan without signing a staff level agreement. When asked whether the government could give a solid deadline for when the deal will happen instead of repeating the same promise of 2-3 days repeatedly, the prime minister deflected the question and did not give a substantial answer.  

Political uncertainty gives rise to fears of delay

The prime minister met the delegation on the same day that law enforcement agencies failed to arrest former premier Imran Khan in the Toshakhana case. Police and rangers had to turn back from Khan’s Zaman Park residence after supporters of the PTI showed up in droves to protect their leader from arrest. 

Meanwhile, as the country’s political situation worsened with elections set to take place in two provinces in the next few months, media reports claimed the IMF was seeking assurances from Pakistan that the future political setup in the country will respect any deal they sign with Islamabad.

According to the report, the expected elections in Punjab and KPK have bolstered the doubts of the money lender, as it hints towards an early general election as well. The IMF requires the PTI leader Imran Khan to pledge to keep up with the conditions if he comes to power later this year.

Government stepping on eggshells 

On further inquiring on what is causing the delay in reaching the accord, the PM responded by saying that the situation currently is uncertain. The government is being extremely careful as to not offend the IMF. He further added that in a bid to provide some relief and mitigate the effects of inflation on low-income citizens, the government is trying to  introduce a scheme whereby motorbikes and rickshaw drivers would receive subsidized petrol. However, this scheme along with others have not been made actionable yet because the government is fearful that the IMF might raise issues and halt the deal.

An elusive deal 

Pakistan and the IMF have been negotiating the resumption of an installed $7bn IMF programme for months now but are yet to reach an agreement. The country had been able to secure the last tranche of $1.17 billion back in August 2022 under the leadership of former finance minister Miftah Ismail. The disbursement had been achieved by ending a massive fuel subsidy introduced by former prime minister Imran Khan and by agreeing to other terms of the IMF. The state bank at the time had more than $8 billion in foreign reserves. 

In September 2022, however, Ishaq Dar took charge of the finance ministry and further negotiations with the IMF took a different turn. Dar, who during a television interview said “he knew how to deal with the IMF” since he had been doing it for decades, decided to artificially keep the price of the rupee high. However, this strategy failed within a few months and by January 2023 Pakistan was staring down the possibility of default. The country began facing a shortage of forex reserves that has led to a curb of imports and skyrocketing inflation.

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