WASHINGTON: Pakistan’s finance minister has promised international lenders to stay true to economic reforms despite a new estimate that his country quickly needs more than $16 billion to recover from devastating floods.
Finance Minister Ishaq Dar also said that a flood donors’ conference promised by French President Emmanuel Macron would take place next month which he hoped would help Pakistan both with immediate and longer-term needs.
The International Monetary Fund in late August released $1.1 billion to Pakistan as part of a $6 billion package sealed in 2019 as the new government of Prime Minister Shehbaz Sharif moved forward on reforms.
“It will be our endeavor, even at the cost of extra effort, that we should complete the program successfully to overcome $16 billion loss,” Dar told AFP in an interview Friday evening in Washington.
Doing so “sends a positive signal to the international community and the markets,” he said, voicing appreciation to the “very responsive” promises of other nations for Pakistan.
Dar — who took the job for the fourth time last month after his predecessor quit — acknowledged political risks.
Former prime minister Imran Khan, ousted in a no-confidence vote in April, has been plotting a return amid protests seeking an early election.
Khan late in his term slashed petrol prices, defying his own government’s package with the IMF, which says that subsidies should only benefit the neediest as Pakistan struggles to put its finances in order.
Dar said that some of his political allies had advocated letting Khan stay on longer to face the consequences of the economic crisis.
“It would have been selfish to have a political approach,” Dar said.
The new government took over to face unprecedented monsoon rains that submerged one-third of Pakistan — the world’s fifth most populous country.
Dar said that a new study commissioned in part by the World Bank and the Asian Development Bank found that Pakistan sustained $32.4 billion in flood losses and would require $16.2 billion for reconstruction and rehabilitation.
“With that challenge, obviously, we have to go to the drawing board” to allocate funding, he said.
He said that minor adjustments may be needed but “everything is in order” for the next review of the IMF which could release further funding.
Dar said he expected Macron’s donor conference sometime in November and that he hoped it would address needs beyond the three to four years typically eyed for immediate disaster recovery.
The World Bank earlier this month once again downgraded the growth forecast for Pakistan, expecting its economy to expand by only two percent in the year through June due to the floods as well as inflation and troubled finances.
Dar, while not criticizing the World Bank’s methodology, said he was a “little more optimistic” and envisioned growth of three percent.
“I think things are settling down already,” he said, while not ruling out impacts from global troubles.
Jihad Azour, director of the IMF’s Middle East and Central Asia department, said that a mission would visit Pakistan next month to start the next review.
He reiterated concern about Pakistan’s blanket fuel subsidies, calling the policy “very regressive.”
“We are encouraging Pakistan as well as also other countries to move from an untargeted subsidy that is a waste of resources and to dedicate those resources to those who need it,” Azour told reporters.
Government of Pakistan is taking all measures for stabilizing the economy and carrying out sustainable and resilient recovery. pic.twitter.com/RN027wEiZM
— Government of Pakistan (@GovtofPakistan) October 14, 2022