Pakistan vows IMF reforms as flood damage estimated at over $16 billion

Pakistan's Finance Minister has promised international lenders to stay true to economic reforms, despite a new estimate that his country quickly needed 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.

In late August, the International Monetary Fund (IMF) 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 endeavour, even at the cost of extra effort, that we should complete the program successfully," Dar told AFP in an interview on 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, the cricket star-turned-politician, ousted in a no-confidence vote in April, has been plotting a return amid protests seeking an early election.

Late into his term, Khan 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.

Such disasters are forecast to worsen in the coming years due to climate change, even though Pakistan contributes less than one per cent to the carbon emissions heating up the planet.

The finance minister said that a new study, commissioned in part by the World Bank and the Asian Development Bank (ADB) 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.

He added that 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.

Earlier this month, the World Bank once again downgraded the growth forecast for Pakistan, expecting its economy to expand by only two per cent in the year through June due to the floods, as well as inflation and troubled finances.

Dar, while not criticising the World Bank's methodology, said he was a "little more optimistic" and envisioned growth of three per cent.

"I think things are settling down already," he said, while not ruling out impacts from global troubles.

ALSO READ:

• Pakistan seeks rescheduling of $27 billion bilateral debt: Finance Minister

• A strong dollar is wreaking havoc on emerging markets. A debt crisis could be next

• Flood-ravaged Pakistan contests ratings downgrade by Moody's

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.

• Pakistan