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Economy

Pakistan's opposition seeks full disclosure of IMF bailout plan

Businesses prepare for weaker rupee as Khan faces stormy parliamentary session

Pakistani Prime Minister Imran Khan faces an acrimonious parliamentary session as opposition members demand to know the terms of a provisional bailout package from the International Monetary Fund.   © Getty Images

ISLAMABAD -- Pakistan's main opposition parties are demanding a full disclosure of a provisional agreement that the administration of Prime Minister Imran Khan is thought to have reached with the International Monetary Fund.

Although Islamabad and the IMF have not signed a formal agreement on a bailout package -- the country faces a balance of payments crisis -- opposition forces suspect the government has begun fulfilling preconditions.

The suspicions were partly ignited by the sudden fall of the Pakistani rupee, which dipped more than 7% against the dollar at one point on Nov. 30. The country's central bank did not step in to support the currency, and its inaction is now being interpreted as official approval to allow the rupee to weaken.

Already, leaders of Khan's political opposition are warning of acrimonious debates when parliament begins its year-end sessions on Monday. "Pakistan still has to finalize an agreement with the IMF for a new loan," Sherry Rehman, a member of the senate, told the Nikkei Asian Review. "But it seems the government is already taking steps to meet the IMF's terms."

Rehman was referring to a round of negotiations that took place in November between the IMF's senior staff members and a team from Pakistan's finance ministry. The discussions centered on a new loan program that would help the country avoid its payments crisis.

Pakistan's liquid foreign currency reserves at the central bank have fallen to the equivalent of less than two months of imports -- down by a third from where they were a little more than two years ago. The situation pushed the Khan government to ask for IMF assistance in October.

The depleted reserves can be traced to the country's rapidly rising current-account deficit, which stood at about $18 billion during the financial year ended in June.

Pakistan, according to local media, is asking for a $6 billion bailout. In return, the IMF is demanding Islamabad undertake structural reforms to rebalance the economy and rein in expenditures.

A car with a Pakistani flag waits for Pakistani Prime Minister Imran Khan.   © AP

Pakistani officials fear the demand will further damage the country's economy.

"The falling value of the rupee has already caused uncertainty for businessmen," said Ahsan Iqbal, a leader of the opposition Pakistan Muslim League, Nawaz (PML-N). "Till there is a final IMF loan agreement, we don't know the terms that have been agreed. The government has an obligation to publicly reveal the terms that it has agreed."

The opposition wants to know how low the government and IMF will allow the rupee to fall.

Some experts suspect that the IMF has demanded a series of "prior actions" from Khan's government before it approves a loan of up to $8 billion. "There are cases [of countries] where the IMF asks a government to first take important economic steps before the fund will approve a loan," a Western economist in Islamabad said. "In Pakistan's case, it appears likely that the rupee has recently been devalued to meet an IMF condition before a new loan is approved."

Opposition leaders say other tough conditions might include higher electricity and gas taxes, which would subsequently fuel inflation. "Ultimately, you are looking at the prospect of a series of unpopular steps that will add to the public's anger and frustration," an opposition leader said.

Even senior leaders of Khan's party -- Pakistan Tehreek-e-Insaf (PTI), or Pakistan Justice Movement -- are privately warning of a public backlash to policy changes linked to an IMF loan program.

Khan, a former cricket star who promised to wipe out chronic corruption in Pakistan, won an election in July this year on a wave of popular expectations.

But a belt tightening associated with an IMF program has diluted support for his government. "It is vital the Pakistani public know all the policy changes that the government wants to introduce," said Iqbal, a former planning minister.

A senior PTI leader warned that there will be no taming the backlash. "IMF programs and their conditions usually involve belt tightening that ultimately makes life difficult for the poorest of the poor," the PTI official said. "Pakistan is not an easy country, and life may get harder as we move forward with the IMF."

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