Pakistan says it will seek IMF bailout as reserves dwindle

Asad Umar, Pakistan’s incoming finance minister, speaks during an interview in Islamabad. (Bloomberg pic)

ISLAMABAD: Pakistan will seek a bailout from the International Monetary Fund as the government seeks to stabilise the economy and plug dwindling finances.

After consulting with “leading economists”, Pakistan will formally approach the IMF for support and Finance Minister Asad Umar will hold talks with officials during the lender’s annual meetings in Bali this week, the Finance Ministry said in a statement late Monday.

Umar told Bloomberg in August that the government may need more than US$12 billion (RM50 billion).

Prime Minister Imran Khan, who came to power after July elections, is under pressure to generate external funding as the country faces the latest in a long line of financial blowouts.

It’s the thirteenth time Pakistan has turned to the IMF for support since the late 1980s and the lender said last week that recent government efforts haven’t been sufficient to stem a looming crisis.

“The challenge for the current government is to ensure that fundamental economic structural reforms are carried out to ensure that this spiral of being in an IMF program every few years is broken once and for all.

“To correct the underlying imbalances, fiscal and monetary actions needed to be undertaken without delay,” the Finance Ministry said.

Foreign-currency reserves have plunged 40% in 2018 to the lowest in almost four years, while the nation is running twin current-account and budget deficits of more than 5% of gross domestic product.

Authorities have devalued the rupee four times since December.

The government is seeking to curb spending, while the central bank has raised interest rates to the highest in three years to help shore up confidence in the economy.

The benchmark stock index fell to the lowest in more than two years on Monday amid worries of the worsening economic crisis.