DUBAI: Pakistan's Prime Minister Imran Khan said his nation needed "painful" economic reforms to cut back on its massive debt, just after meeting the head of the International Monetary Fund, signaling the former cricketer may be willing to slash government spending for a bailout. Khan made the comments at the World Government Summit in Dubai.
Khan made a point in an address to repeatedly hit on the need for economic reforms as IMF chief Christine Lagarde looked on from the audience. "I repeat the reforms are painful. It's like a surgery. When you conduct surgery for a while the patient suffers but that improves," Khan said. "The worst thing that can happen for society is that you keep postponing reforms because of the fear that you would have opposition, the vested interests stand up and you don't do reforms." Before taking the stage, Khan met with Lagarde. Pakistan has been seeking an $8 billion bailout from the IMF. Pakistan has around $100 billion in external debts and liabilities, according to the State Bank of Pakistan.
A statement from Lagarde called the meeting "good and constructive. I reiterated that the IMF stands ready to support Pakistan," Lagarde said. "I also highlighted that decisive policies and a strong package of economic reforms would enable Pakistan to restore the resilience of its economy and lay the foundations for stronger and more inclusive growth."
IMF tells Pak to adopt ‘decisive policies’
The IMF has asked Pakistan to take “decisive actions” as a prerequisite for the bailout package. The demand for implementation of drastic measures was made during a meeting between Lagarde and Imran in Dubai. “I also highlighted that decisive policies and a strong package of economic reforms would enable Pakistan to restore the resilience of its economy and lay the foundations for stronger and more inclusive growth,” a brief IMF handout quoted Lagarde as saying. The IMF described meeting with Imran as “constructive” but the tone of its handout suggested that the IMF top management endorsed the stance of its staff negotiating with Pakistan. In September last year, Pakistan had decided to seek a bailout package to avoid default on its international debt obligations. But things could not move in the desired direction as the Pakistan government was unwilling to take politically unpopular decisions demanded by IMF.
The IMF, according to sources, was asking Pakistan for further increase in electricity and gas prices, upward adjustments in tariff besides demanding a complete and meaningful free float exchange rate regime. Due to fear of political backlash, the government at that time was not ready to concede. It, however, has agreed to implement most of these measures now but only differs with the timing and pace suggested by the IMF.
Following the Lagarde-Khan meeting, Pakistan’s finance ministry issued a handout but it did not shed much light on the discussions. “During the meeting, PM Imran Khan reiterated the government’s commitment for undertaking structural and governance reforms and strengthening social protection in the country,” it said. Since coming to power last August, the biggest challenge for Khan’s government was to avoid a sovereign default by shoring up its depleting foreign exchange reserves. Khan’s last year’s visits to China, Saudi Arabia and UAE resulted in aid packages from the three countries, which provided it some breathing space but experts still believe that IMF bailout is inevitable.
