Finance Minister Shaukat Tarin said military cooperation with the United States over its withdrawal from Afghanistan had given the government “some space” to delay unpopular IMF reforms.
Islamabad is in talks with the Fund to release the next tranche of funding as part of a $6bn loan programme as the government struggles to tame inflation and recover from the shock of the pandemic.
Officials are seeking US support in the form of financial backing from the Washington-based international financial institution in exchange for helping President Joe Biden withdraw all US troops by September 11 and bringing the Taliban to the negotiating table, Financial Times reported.
Tarin said the IMF had been receptive to Islamabad’s request to hold off raising power tariffs and sales taxes that have hit Pakistan’s poor hard.
“What we do not need is more burden on our poor people,” said Tarin. “We have been talking to the American officials and they’re willing to help.”
Tarin, who took office in April, has returned to the post after negotiating an IMF bailout in 2008 when Pakistan-US cooperation was at its height.
“In 2008, we obviously had the US and everybody else on my right side because of the war on terror […] Today things are different,” said Tarin.
The government’s relationship with the US deteriorated after the Trump administration cut $2bn in security aid in 2018, citing its “support” of the Taliban. Since then, however, Pakistan has played an important role in helping the US end its war in Afghanistan.
Jake Sullivan, the White House national security adviser, said this week that Washington and Islamabad have had “constructive discussions” about “the future of America’s capabilities”.
Tarin said the resumption of a US military training programme with Pakistan indicated that the relationship was warming. He also said the World Bank was expected to approve at least $800 million of new loans by the end of the month.
The government had made progress in addressing its financial challenges but the fallout from the pandemic and political turmoil risks derailing the reform agenda, said rating agency Fitch last month, holding its outlook on Pakistan stable at B-.
Islamabad has been able to access external funding in part because of its compliance with the IMF programme and its progress in addressing terrorist financing.
“As President Biden is withdrawing troops, Pakistan’s leverage on the US has improved,” said Asfandyar Mir, a South Asia analyst at Stanford University.
“The US is desperate for help with both the Afghan peace process and counterterrorism. It is left with no option but Pakistan.”
