Pakistan needs to borrow “to repay IMF”

25 June 2013

In late June, finance minister Ishaq Dar informed Pakistan’s national assembly that the government “will have to go to the IMF” in order to repay current outstanding loan instalments to the Fund (see Update 84). Though adamant that the government “would not accept any conditionality” imposed “against the interest … of the country”, Dar conceded that without a moratorium on scheduled repayments related to an outstanding $7.6 billion debt to the IMF, Pakistan would be unable to pay the instalments without taking its levels of foreign currency reserves below a “reasonable” level. Also in late June, a senior Pakistani government official was quoted in the Gulf Times newspaper as saying that any “possible bailout package” from the IMF, understood to involve a loan of approximately $4 billion, will include two conditions: the revival of plans for a reformed general sales tax (RGST) to be implemented by 2014/15 financial year and the withdrawal of energy subsidies, requiring hikes in the cost of electricity.

A late May report from UK NGOs Islamic Relief and Jubilee Debt Campaign issued a call for debt relief for Pakistan. Islamic Relief’s Pakistan country director Fayaz Ahmad wrote in the foreword: “In providing ‘bail-out loans’, foreign lenders attach economic conditions that inflict greater suffering on the poorest in society – like the IMF’s insistence that Pakistan eliminate oil and electricity subsidies – and the government is unable to refuse. For these reasons, Islamic Relief is calling for a full and transparent audit of Pakistan’s external debt, and the cancellation of unjust debt.”