Without the agreement of the legislature, IMF funding cannot be utilised for political purposes: Division of Finance

ISLAMABAD: The Finance Division confirmed Saturday that the International Monetary Fund (IMF) has not expressed worry over the government’s likely use of IMF loans for electioneering.

According to a statement issued by the division, the delay in signing an agreement with the IMF is due to the lender’s need for assurance from the finance ministry that the money would not be used for political objectives.

“It is clarified that this news is false and unfounded, as the IMF has never raised any such concern with the government, nor can any funds be utilised for any purpose without the approval of the Parliament through the budget,” the statement stated.

The explanation comes after sources informed Geo News that, with a growing trust gap between the IMF and the Pakistani government, the lender is concerned that monies would be spent for elections rather than reforms or growth.

The IMF also requested that the government not depart from the budget’s goals and not divert funds from one area to another.

According to the sources, another reason for the delay in striking an agreement with the international organisation is the strengthening of Pakistan-China commercial ties.

A third cause, they claim, is the country’s political environment, which has lately become even more turbulent in the wake of Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan’s detention.

During the agreement’s delay, the country’s foreign currency reserves fell to less than a month’s import cover after IMF financing froze in November, due to hitches over fiscal policy revisions when IMF officials visited Islamabad in February for negotiations.

They were part of the ninth review of a $6.5 billion rescue programme agreed upon in 2019, the restart of which is vital for Pakistan to avoid incurring default on foreign payment commitments.

Pakistan was required to fulfil IMF-mandated initiatives such as withdrawing subsidies in the power, export, and agricultural sectors, raising energy and fuel costs, and instituting a permanent power surcharge, among other things.

These moves included hiking its main policy rate to an all-time high of 21%, establishing a market-based currency rate, arranging for external finance, and imposing additional levies totaling more than Rs170 billion ($613 million).

Before the end of the IMF plan in June, Pakistan will get another $1.4 billion in funding.

The lender’s funds will also open the door to additional bilateral and multilateral financings for the cash-strapped government.