IMF package

THE IMF decision to send its mission to Pakistan next week to discuss the resumption of its stalled bailout package should clear uncertainty and mitigate the risk of a sovereign default that appeared imminent with foreign exchange reserves lately dropping to just $3.6bn. That the Fund is sending its officials to conclude the discussions on the pending review of the programme after three months and only after the State Bank lifted the administrative restrictions on the exchange rate to let the rupee discover its market value against the dollar shows that the government is unlikely to win any significant relaxations from it. While it is crucial to seek immediate IMF funding to shore up its reserves, the government shouldn’t focus only on short-term relief. The current loan package is set to end on June 30, and if there’s no new snag, we will get up to $3bn in funding from the lender. This may take care of our immediate balance-of-payments needs but will not be sufficient to cope with a similar payments crisis the next fiscal year and beyond. It is, therefore, advisable that the government seek to increase the size of IMF funding and the programme, and extend its duration.