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IMF divided over request by Pakistan, other borrowers to suspend surcharges

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  • Argentina, Pakistan, others pushing IMF to drop or waive surcharges
  • US, Germany, Switzerland and other oppose change
  • IMF estimates surcharges will cost affected borrowers $4 billion

WASHINGTON: The International Monetary Fund’s (IMF) executive board on Monday discussed the surcharges it collects from mostly middle- and lower-income countries on larger loans that are not repaid quickly, but failed to agree to launch a formal review.

Argentina, Pakistan and others are pushing the IMF to drop – or at least temporarily waive – the surcharges, which the IMF estimates will cost affected borrowers $4 billion on top of interest payments and fees from the start of the COVID-19 pandemic through the end of 2022.

The United States, Germany, Switzerland and other advanced economies oppose a change, arguing that the fund should not change its financing model at a time when the global economy is facing significant headwinds.

An IMF spokesperson said the board discussed potential changes to the policy during its regular review of the global lender’s precautionary balances, but failed to reach consensus on reviewing the policy.

“Overall, views on changes to the surcharge policy continued to diverge, including on the merits of a temporary waiver of surcharges,” the spokesperson said.

No details were provided, but the fund said it would publish a staff paper and a press release in coming days that would provide a fuller account of the board’s deliberations. No date was set for any further board discussion.

Kevin Gallagher, who heads the Global Development Policy Center at Boston University, said big shareholders should rethink their opposition, given the global economic outlook.

“This is the most urgent time to address a fundamentally flawed business model where the IMF is generating revenues by taxing those most in need,” Gallagher said.

But it was notable, he said, that the IMF’s shareholders had failed to outright reject a review.

“One silver lining is that the biggest shareholders … didn’t have enough strength to kill the proposal,” he said.

Stalemate persists between IMF and Pakistan 

Talks between Pakistan and IMF are at a stalemate with global lender pushing Islamabad on policies and reforms needed to keep the bailout programme’s targets on track and complete the pending ninth review.

“… a key purpose of program reviews in Pakistan, as in all program countries, is to evaluate both program performance to date, as well as, forward-looking, whether the program is on track or policy measures are needed to meet program targets, advance reform objectives, and maintain macroeconomic stability going forward,” Esther Perez Ruiz, IMF’s Resident Chief in Pakistan, said in a written reply.

An IMF review for the release of the next tranche under bailout funding has been pending since September. 

The broader agreement on the revised macroeconomic framework could pave the way for evolving consensus on a staff-level agreement for the completion of the 9th review under the $7 billion Extended Fund Facility.

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Changes in the US dollar’s value are directly correlated with variations in gold prices.

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The price of 24-karat gold in Pakistan increased by Rs1500 on Thursday, reaching Rs231,000 per tola. This was another jump in the price of gold in the country.

Dealers reported a comparable surge in the price of 10 grams of 24-karat gold, which is currently trading at Rs198,045 after rising by Rs1285. In addition, the cost of ten grams of 22-karat gold increased significantly, trading at Rs 181,541.

These fluctuations are strongly correlated with shifts in the US dollar’s value, demonstrating the tight connection between gold prices and exchange rates. This emphasizes how local gold markets are impacted by variables related to the global economy.

At Rs2,580, the price of 24-karat silver remains steady right now. The price of gold increased significantly on a global scale as well, rising by $14 to $2,214 per ounce.

It’s critical to understand that changes in the worldwide market can have a substantial impact on gold prices in Pakistan throughout the day. The gold rates that are offered are obtained from reliable sources, mostly situated in Karachi and Multan.

It is recommended that individuals seek the advice of nearby gold merchants and jewellers for the most precise and current information regarding gold prices.

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Pakistan pledged to finish building the TAPI gas pipeline.

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The minister discussed the importance of the TAPI gas pipeline project for Pakistan’s energy needs during a meeting with Turkmenistan’s ambassador to Pakistan, Atadjan Movlamov.

The Minister was congratulated by Ambassador Movlamov on taking office and his commitment to the project was noted.

Dr. Musadik Malik thanked the ambassador for his kind words, acknowledged the support, and promised to maintain the two nations’ friendship. The intergovernmental commission and working group meetings for the project this year were briefed by Atadjan Movlamov.

He invited the Minister to attend the Turkmenistan Energy Forum, which would take place in Paris the following month.

TAPI undertaking
The project is for the construction of a 1,680-kilometer pipeline with a 56-inch diameter that can carry 3.2 billion cubic feet of gas per day (bcfd) from Turkmenistan through Afghanistan and Pakistan to the border between Pakistan and India.

According to the terms of the TAPI agreement, Afghanistan would receive its portion of 0.5 billion cubic feet of gas per day, while Pakistan and India will each receive 1.325 billion cubic feet of gas per day.

In order to carry out the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, Pakistan and Turkmenistan inked a cooperative implementation plan in Islamabad on June 4.

Prime Minister Shehbaz Sharif and a delegation from Turkmenistan, led by Minister of Energy and Water Resources Daler Juma’a, were present at the ceremony.

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The price of gold is still rising in Pakistan.

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According to the All Sindh Sarafa Jewellers Association, the cost of 10 grams of 24 karat gold grew by Rs. 86 to Rs. 196,760 from Rs. 196,674, while the cost of 10 grams of 22 carat gold jumped to Rs. 180,363 from Rs. 180,284.

The price of silver per tola and ten grams stayed at Rs. 2,211.93 and Rs. 2,580, respectively.

According to the Association, the price of gold on the global market rose by $7 to $2,200 from $.2,193.

It is important to note that Pakistani and IMF personnel have agreed at the staff level on the second and final review conducted as part of Pakistan’s Stand-By arrangement.

The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on the second and final review of Pakistan’s stabilization program, which is supported by the IMF’s US$3 billion (SDR2,250 million) SBA Agreement. This is according to the official statement released by a team led by Nathan Porter.

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