The recently held donor’s conference in Geneva to help Pakistan raised commitments of $9 billion – of which $8.7 billion is from multilateral agencies and will be spread out over the next three years. While the Pakistani state must feel bolstered by this news, we have to bear in mind that these are not going to resolve Pakistan’s liquidity crisis as is wrongly being stated by the current government. The State Bank of Pakistan’s reserves are down to around $4.5bn or equivalent to less than four weeks of imports after recent loan payments to two UAE-based banks.
Second, these are only pledges and since these are primarily from multilateral donors they will not materialize unless Pakistan improves its relationship with the IMF. While Pakistan has requested the IMF for ‘a pause’ in its tough demands for economic reforms chances are that the Fund will not budge much from its present position.
Most of the Western delegates at the Geneva conference “impressed upon Pakistan at the conference to implement macroeconomic reforms to swiftly conclude the ninth review of the IMF programme not only to create fiscal room for the government’s own contribution to flood recovery costs but also to ensure confidence among its international partners and investors. This clearly underlines that materialisation of most promised multilateral and bilateral funds will be dependent on the resumption of the IMF programme.”
Pakistan, as an editorial in Dawn noted, “must understand that this time around the new lifeline they are seeking in the shape of relaxed IMF conditions and a sustained international support plan will not be made available unless the country is seen taking concrete action on reforms for longer-term economic recovery.”