Pakistan IMF: Negotiators fail to reach crucial bailout agreement.

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Eleventh-hour negotiations between Pakistan and the International Monetary Fund (IMF) have failed to unlock $1.1bn in crucial funds aimed at preventing the country from going bankrupt.

A deepening economic crisis has all but emptied Pakistan’s foreign exchange reserves, leaving it barely enough dollars to cover a month of imports and it is struggling to service sky-high levels of foreign debt.

The IMF team, which leaves Islamabad on Friday, said “considerable progress” had been made after 10 days of talks.

“Virtual discussions will continue in the coming days,” the head of the IMF mission Nathan Porter said in a statement.

Although there was no financial lifeboat, both sides tried to paint the meeting positively. Pakistan’s finance minister told a news conference the country had been given a detailed roadmap. He talked of “painful but necessary” reforms – the IMF wants to see action and commitments from Pakistan before it commits to lending more money.

In January annual inflation soared to over 27%, the highest it’s been in Pakistan since 1975, and there are mounting fears for the economy in a pivotal election year.

This week the rupee sank to a historic low of 275 to the dollar, down from 175 a year ago, making it more expensive for Pakistan to buy and pay for things.

The lack of foreign currency is one of the most pressing of Pakistan’s problems.

Factories like Jubilee Textiles in Faisalabad, the industrial heartland of Pakistan, were shut recently – not by the frequent power cuts that have dogged Pakistan for years, but because they couldn’t get hold of dollars to pay for the goods they need.

“If we can’t import, how can we manufacture? We’ve already made a loss,” its manager Fahim told the BBC, adding that all its 300 workers had been sent home.

Jubilee’s printing machines have only just restarted after shutting down last month. Piles of white cotton sheets sat in iron tubs, covered by a light coat of brick dust, when the BBC visited, with the only sound the drip, drip of an industrial washer.

Walking through the network of frozen machines, Fahim said the factory had run out of the dyes they imported from China, not because they weren’t available, but because they said their bank wouldn’t clear the dollars to pay for them for weeks.

According to analysts, the government had been holding the bank’s exchange rate artificially high behind the scenes which were contributing to the lack of dollars in the system. At the end of last month, they allowed it to drop, which could help some businesses, but also push prices up.


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