A direct fallout of the uncertainty that has gripped the bailout package for Pakistan has been Thursday’s rather abrupt resignation of the finance minister, Asad Umar. Ostensibly, he has put in his papers after the cabinet reshuffle and his transfer to the Energy ministry.
Prime Minister Imran Khan has thus sought to blunt opposition criticism of the government’s handling of the economic crisis. And as Sohail Mahmood, Pakistan’s High Commisioner in India, takes over as his country’s Foreign Secretary, he will have to countenance a critical issue, albeit intrinsically economic, in Islamabad’s dealings with the International Monetary Fund and also, of course, China.
The $8 billion bailout package, that the country desperately needs, is far from being finalised and might not after all materialise this month as had been generally expected. From Washington to Islamabad, both sides are still engaged in what officials call an “intense conversation on the final details of that full agreement”.
The fact that the IMF delegation is likely to visit Islamabad in May and not April is suggestive of an almost certain delay in the prime pumping. Central to the dissonance is the China- Pakistan Economic Corridor (CPEC). It is pretty obvious that the ambitious cross-country project will come to bear on the bailout package that Pakistan seeks.
In the net, fiscal assistance will hinge on the details and objectives of the project, couched in a written guarantee from both Pakistan and China that the IMF assistance will not be used to repay loans to China. Both sides are said to be engaged in “fine-tuning” the details of the proposed IMF programme.
Pakistan wants the IMF to review some of the conditions it has attached to the package. At another remove, the IMF insists that such conditions are “absolutely essential” for successful completion of the programme. Should it materialise, this will be the IMF’s 14th tranche to Islamabad. The conditions attached to previous programmes were also not fully implemented because these were believed to be too restrictive.
Pakistan wants the IMF to focus on long-term structural reforms that will help address the balance-of-payments crisis and revive its economy instead of attaching conditions that will be difficult to implement.
Theoretically, precedence will have to be accorded to the terms of the lender. Aside from written guarantees from both Pakistan and China, the IMF has sought details of financial cooperation between the two countries, notably the assistance related to infrastructure development, nuclear power plants, joint manufacture of JF-17 Thunder fighter jets and procurement of submarines.
The terms and conditions go beyond infrastructure and are distinctly related to defence. It is, therefore, a contentious triangle between Pakistan, China, and the IMF and the equation will not be easy to work out. To claim that IMF might at worst delay the bailout package is to take a charitable view of the conundrum.