The International Monetary Fund (IMF) has pressed Pakistan to let its currency gain the real value amid the country’s tighter currency controls, which have now created a black market for dollars and also discouraging foreign inflows through regular channels.
However, Islamabad has not accepted the IMF’s stance on the grounds that the State Bank of Pakistan (SBP) was not throwing sacred dollars in the interbank market.
Sources told The Express Tribune that IMF Mission Chief to Pakistan Nathan Porter on Thursday, in a meeting with Finance Minister Ishaq Dar, urged the government to implement the market-based exchange rate.
They added that the IMF had strong apprehensions that the Pakistani authorities were artificially controlling the exchange rate through administrative pressures on banks and currency exchange dealers.
The sources said Dar did not accept the IMF’s viewpoint that the authorities had any control over the exchange rate.
The meeting between Dar and Porter remained inconclusive because of a disagreement over the exchange rate policy coupled with power sector issues.
Despite foreign exchange reserves slipping to a critically low level of $6 billion as of December 21, the rupee marginally shed its value by 21 paisa to Rs225.64 to a dollar on Friday.
This has strengthened the position that the central bank and finance ministry were trying to control the nosedive of the rupee by informally setting the value for the interbank and open market.
The only possibility for an early IMF mission is that Pakistan changes its position on the exchange rate and the power sector policies.
The delay in the start of the 9th review talks has hampered the approval of the next loan tranche of $1.1 billion besides bringing a pause in any major inflows by other bilateral and multilateral creditors.
There are some in the government that still believe that the IMF will have to show leniency, as the world may not like to see Pakistan defaulting on its debt obligations.
The remaining $6 billion foreign exchange reserves are not enough to fully fund Pakistan’s $8.5 billion external debt obligations from January to March 2023.
However, there is a possibility that the UAE and China — with $2 billion each — will rollover their maturing debts during this period.
This will still require the government to repay $4.5 billion from its reserves.
The $4.5 million maturing repayments in the next three months include $1.9 billion long-term debt repayment to China and $1 billion commercial loans.
Pakistani authorities hope that China will refinance a $700 million commercial debt that was paid back last month.