The Pakistani government has denied reports that the delay in reaching an agreement with the International Monetary Fund (IMF) is due to concerns about the possibility of funds being used for political purposes, according to a statement from the Finance Division. Certain press sections had reported that the government was being asked to give assurances that IMF funds would not be used for electioneering. The government stated that these reports were unfounded, adding that the IMF had never raised any such issues with them. The clarification comes amid rising tensions between the IMF and the Pakistani government, with sources suggesting that one of the reasons behind the delay in reaching an agreement with the lender is the deepening economic relationship between Pakistan and China. Pakistan’s foreign exchange reserves have fallen to less than a month’s import cover as a result of the delay.
In November, the stalled IMF funding deal affected the country’s foreign exchange reserves and officials had visited Islamabad in February to discuss fiscal policy adjustments. Pakistan had agreed on a $6.5 billion bailout package with the IMF in 2019. During the ninth review of the package, the IMF demanded that Pakistan carry out several actions, including reversing subsidies in its power, export and farming sectors, price hikes for energy and fuel and a permanent power surcharge, among other measures. Pakistan had to raise external financing, implement market-based exchange rates, and raise over Rs170 billion ($613 million) through new taxes. Finalizing this program will provide another tranche of $1.4 billion to Pakistan before it concludes in June, which will unlock other bilateral and multilateral financings for the country.