Pakistan needs to take steps to avoid an economic crash: IMF
Cash-strapped Pakistan must take decisive steps to make sure that its high earners pay taxes and only the poor get subsidies if it wants to function as a country, the International Monetary Fund (IMF) has warned.
In an interview with Deutsche Welle on the sidelines of the Munich Security Conference in Germany, IMF chief Kristalina Georgieva said Islamabad needs to take strong measures to avoid getting into a “dangerous place” where its debt will have to be restructured.
Speaking amid fears of a default by Pakistan, she said the IMF was very clear that it wanted the poor people of the Islamic country to be protected, Dawn newspaper reported.
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The wealthy should not benefit from subsidies, she said.
IMF fiat
“What we are asking for are steps Pakistan needs to take to be able to function as a country and not to get into a dangerous place where its debt needs to be restructured.”
Pakistan was devastated last year by flash floods that affected a whopping third of its population, Georgieva said.
“I want to stress that we are emphasising two things. One: Tax revenues. Those who can, those that are making good money (in the) public or private sector need to contribute to the economy.
“Secondly, to have a fairer distribution of the pressures by moving subsidies only towards the people who really need it. It shouldn’t be that the wealthy benefit from subsidies,” she said.
IMF-Islamabad talks
The IMF chiefs statement came days after the lending agency and Pakistan ended the ninth review of a $6.5 billion bailout package without a staff-level agreement after 10 days of talks.
Both sides have agreed to a set of measures that could still help clinch the deal despite rising fears that the IMF conditions could lead to a steep rise in prices of essential commodities.
Pakistan, which is in dire need of funds as it battles a terrible economic crisis, has received financial assistance from the IMF in the past.
An agreement on the ninth review of the programme would release over $1.1 billion. A resumption of the IMF programme would also unlock other avenues of funding for Pakistan.
Foreign reserves fall
Meanwhile, foreign exchange reserves held by the State Bank of Pakistan have fallen to around $3 billion, barely enough to cover three weeks of controlled imports.
The IMF has given a deadline of March 1 to Pakistan to implement all the austerity measures.
(With agency inputs)