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Reuters
By Kay Johnson
ISLAMABAD, Oct. 5 (Reuters) – The International Monetary Fund (IMF) warned on Friday that Pakistan needed to quickly secure "significant external financing" to avoid a currency crisis, but did not say who could provide the money.
The IMF also said additional measures were needed to stabilize the economy while welcoming actions taken over the past year.
Prime Minister Imran Khan's new government is reluctant to ask the IMF for a second bailout in five years.
But foreign exchange reserves fell by $ 627 million last week to $ 8.4 billion, barely enough to cover sovereign debt payments due until the end of the year. year. The fall of last week was the strongest in years.
Finance Minister Asad Umar said the foreign exchange reserves should be increased by at least $ 8 billion, but so far none of its allies, including China Saudi Arabia has offered such a sum despite the high-level visits of their leaders.
In his statement on Friday, the IMF did not use the word "bailout", but made it clear that Pakistan needed to quickly find a source of inflows of external funds.
"Strong political action and significant external funding will be needed to stabilize the economy," the statement said, citing head of the delegation Harald Finger, saying both are necessary "in the short term".
Many economists believe that Pakistan will ultimately have no choice but to return to the IMF.
However, as the lender of last resort in the world, the IMF imposes strict conditions on aid, which makes it easier to reduce governments' budget deficits. This would make it difficult for Khan to fulfill his campaign promises for an "Islamic welfare state".
The IMF urged the Khan government to extend the reform measures taken over the past year. Past measures included an increase in interest rates of 275 basis points and a depreciation of the rupee of around 20% since December.
The lender said that controls on the devaluation of the rupee should be eased and the interest rates raised, as well as the reduction of the budget deficit.
The lender said that there should be "more exchange rate flexibility" and a further increase in interest rates. It is also necessary to reduce the budget deficit, he said.
"Recent policy measures are going in the right direction, but are not yet sufficient," the IMF said in a statement.
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