The current volatile political situation in Pakistan has become a factor in delaying a much-needed deal with the Washington-based IMF that may stabilise the cash-strapped country's economy, according to a media report on Wednesday.

Pakistan's economy is in dire straits. The country is awaiting a much-needed USD 1.1 billion tranche of funding from the International Monetary Fund (IMF).

The funds are part of a USD 6.5 billion bailout package the IMF approved in 2019, which analysts say is critical if Pakistan is to avoid defaulting on external debt obligations.

Quoting diplomatic sources, the Dawn newspaper reported that global lenders, particularly the IMF, are seeking assurances from Pakistan that the future political setup in the country will respect any deal they sign with Islamabad.

Pakistan and the IMF have been negotiating the resumption of an installed USD 7 billion IMF programme for months but have yet to reach an agreement.

Last week, Finance Secretary Hamed Yaqoob Sheikh told reporters that an agreement was likely in the next few days, though Pakistan has missed such timelines in the past as well.

Pakistan has already implemented a series of policy measures that the IMF suggested, including increased taxes, higher energy prices and rising interest rates to the highest in 25 years.

But two major issues remain unresolved: financial and political assurances. The IMF wants Pakistan to show that it can raise enough financial resources to narrow its balance of payments gap.

Since the IMF only provides a part of the loan a borrower needs, it requires the borrower to show that it has pledges from other lenders to bridge the gap.

According to diplomatic sources, China, Saudi Arabia, and other partners have offered help, but the IMF thinks it is insufficient. The government of Pakistan says that the gap is USD 5 billion, but the IMF believes Pakistan needs USD 7 billion.

The IMF also needs the assurance that the government in Islamabad signing the deal can implement it.

But the expected elections in Khyber Pakhtunkhwa and Punjab province, and the possibility of the national elections soon after, have persuaded the IMF to think that the present government may or may not be there to implement the deal it signs.

Elections in the Punjab province are scheduled to be held on April 30 while the Khyber-Pakhtunkhwa governor proposed to hold elections in the province on May 28.

“That’s why the IMF would also need an assurance from the opposition forces, particularly the Pakistan Tehreek-e-Insaf (PTI), that they will respect the deal too if they replace the present government,” one of the sources told the newspaper.

“Although the future government is most likely to fulfil the pledges made by the present government, the opposition may not want to make things easier for the government by offering a pledge at this stage,” the source added.

“In such a situation, the IMF usually approaches the opposition, and may contact Imran Khan too.” “The IMF cannot send papers to the board for closing the deal until these two things — financial and political assurances — are cleared,” the report added.

“Yes, it is right that the IMF and Pakistan are close to finalising the deal, but it is difficult to say when they will sign it,” the source added.

Separately, US Ambassador to Pakistan Donald Blome wished for a deal between Pakistan and the IMF assuring Washington's willingness to support the country in its efforts to resume a stalled bailout programme.

Blome also indicated that the IMF bailout package for Islamabad will take its final shape in a couple of days.

“The United States is ready to cooperate with Pakistan to help on the issue,” Blome said while speaking to journalists at an event in Islamabad on Tuesday.

The envoy also expressed Washington's willingness to help Islamabad with the ongoing challenge of terrorism.

Political crisis prevails in Pakistan, following months of unrest since the removal of former Prime Minister Imran Khan in April.

Clashes erupted on Tuesday between police and Khan's supporters. PTI workers and police clashed in Lahore's Zaman Park area after a contingent of the Islamabad police, along with armoured vehicles, reached party chief Khan's Lahore home to arrest him after a non-bailable warrant was issued in the ongoing Toshakhana (gift depository) case against him.

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