Pakistan will ask for one of its largest bailouts from the IMF when its finance minister travels to Bali this weekend for the fund’s annual meeting, officials told the Financial Times.
Asad Umar announced on Monday night that his government would approach the IMF to open talks on a financial support package as the country looked for a way out of its foreign currency crisis.
The announcement underlined the gravity of the country’s financial problems, and signalled an end to Prime Minister Imran Khan’s attempts to avoid approaching the fund by courting other lenders. It also adds to concerns about the health of emerging economies across the world, following the crises in Argentina and Turkey.
People briefed on Mr Umar’s plans told the FT on Tuesday that the finance minister was planning to ask for loans worth between $6bn and $7bn, which would put the rescue package in line with the country’s last bailout in 2013.
One person said Pakistan wanted to borrow the maximum allowed under the fund’s normal rules on access to finance, but not to go beyond that, which could have made it difficult to secure the financing it needed.
“Ultimately, the authorities felt it was important to present a request which would not trigger undue pressure from the IMF’s biggest stakeholders — especially the US,” said one economist who was consulted on the plan.
The request to the IMF comes after years of high imports and low exports, which have taken their toll on the country’s stock of foreign reserves.
The situation reached critical levels in recent weeks, with the Pakistani central bank now holding just $8.4bn in foreign currency, barely enough to cover imports until the end of the year.
Mr Khan has spent much of his first few months in office speaking to his country’s major foreign allies, including China and Saudi Arabia, in an attempt to not rely on the US-based fund.