There is tacit coordination that the international community will not let cash-strapped Pakistan — as long as it stays on course — to become Sri Lanka, a media report said on July 15, days after Islamabad signed a preliminary agreement with the International Monetary Fund (IMF) for the release of $1.17 billion loan tranche that had been on hold since earlier this year.
The IMF on July 14 confirmed that an agreement was reached with Pakistan, which is facing a serious economic crisis since last one year, to restore a stalled loan programme and also increased its size from $6 billion to $7 billion.
The revival of the IMF’s bailout is likely to help the government overcome the economic crisis as the release of installment of loans from the fund will encourage other international financial institutions to engage with Pakistan.
According to The Express Tribune newspaper, background discussions with diplomatic channels have revealed that the international community was standing behind the IMF all the time and did not give any chance to the government to walk away from the talks by not extending any kind of cash assistance to Pakistan.
“All the friends of Pakistan had asked it to work with the IMF and the international community was constantly briefed by the IMF staff about the progress on the programme negotiations,” the daily reported, citing diplomatic sources.
The disclosure by the diplomatic channels was also confirmed by the government sources, who told the paper that Saudi Arabia and the UAE had also advised Prime Minister Shehbaz Sharif to first take the IMF route.
Receiving no cash from Saudi Arabia, the UAE and Qatar was also surprising for the Sharif family that has historically cordial relations with the royal families of these countries.
There is tacit coordination that the international community will not let Pakistan — as long as it stays on course — to become Sri Lanka, where its President Gotabaya Rajapaksa sent in his resignation after fleeing to Singapore amid mass protests over his country’s economic meltdown, the daily said.
The government sources said that this ended the chances for taking any popular decision despite fast erosion of the political capital of the ruling alliance. However, those countries did help Pakistan avoid a default by extending billions of dollars loans that matured in the past six months but were further extended.
The diplomatic sources said that the IMF board of directors belonging to these countries had given assurances that they would not withdraw their existing bailouts. The international community believes that Pakistan needs reforms under the IMF programme — even more than its money.
According to the diplomatic sources, many people would think that Pakistan had been in a similar situation in 2018. However, they added that the situation was different this time, as there was less money available in the international markets.
The IMF’s decision to give only $1.2 billion after pushing Pakistan to swallow many bitter pills also indicates that the international creditors would keep Pakistan in a tight spot.
The previous government of Imran Khan had signed the 39-month loan programme in July 2019 aimed at avoiding default on foreign repayment obligations. However, the country remained in turmoil and its foreign exchange reserves remained thin amid heightened external debt-related vulnerabilities, the newspaper said.