(MENAFN- Gulf Times) Pakistan has accepted the International Monetary Fund's (IMF) precondition to let the rupee depreciate by over 4% to qualify for any fresh bailout package that is needed to avoid a default-like situation.
Notwithstanding Adviser on Finance Miftah Ismail's statement that the government is not seeking any IMF assistance, the Washington-based lender is said to have been obliged to steer through highly difficult 2017-18 and 2018-19 financial years.
The government is expected to take up the issue of new IMF financing in April during World Bank-IMF spring meetings in Washington.
Ismail does not see any further downward readjustment of the currency in the near future. However, those who are in the know of things, both in the central bank and the Ministry of Finance, maintain that lobbyists at home and abroad are working to persuade the authorities to go for another depreciation before June.
Insiders described it as a ‘panic situation' in the Ministry of Finance and the word ‘bottom line' is being used for seeking an emergency $6bn-$7bn in IMF assistance to make timely repayments and tackle the looming balance of payments crisis.
In the absence of any credible economic team, two officials Talib Baloch and Khaqan Najeeb are considered ‘opening batsmen' of the finance ministry to take important decisions.
One is calling for seeking IMF assistance to ward off the impending balance of payments crisis while the other is suggesting acquiring commercial loans continuously at high mark-up.
Since the World Bank and the Asian Development Bank (ADB) have linked their annual assistance to the IMF's signal, seeking commercial loans, particularly from China and Chinese commercial banks, are seen a viable option to manage external inflows.
A total of $1.3bn in commercial borrowing had been obtained in the last few months which also included $900mn in just one quarter. There is no strategy how to deal with the intensifying balance of payments crisis.
Successive secretaries of the Ministry of Finance and governors of the central bank are being held responsible for having created the current economic mess due to which the fiscal and current account deficits have increased disproportionately causing new difficulties for the country.
Since December last year, the government has let the rupee weaken by about 10% that has multiplied the country's external debt.
What if the IMF dictates are accepted to push the currency down by another 13 per cent as has been demanded in every meeting with the Pakistani officials?
Uncertainty and gloom over the economic situation have grown following the release of post-programme monitoring report by the IMF that believes that risks to macroeconomic stability are increasing and that widening fiscal and external deficits could land Pakistan into new trouble.
The timing of the report has been termed intriguing by independent economists as it eroded investors' confidence.
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