Pakistan needs a "constructive relationship" with the global financial institutions if it wants to avoid a default, the former chief of the cash-strapped country's central bank has said.
The remarks by Reza Baqir, the former governor of the State Bank of Pakistan came as he addressed the final session of the Pakistan Literature Festival, held on Saturday in London.
He said that if there is a default, Pakistan will go through a “painful, protracted process”.
Pakistan's chances for the revival of the current USD 6.5 billion International Monetary Fund programme have almost diminished before it expires on June 30.
Out of the USD 6.5 billion packages, the IMF has not yet disbursed USD 2.6 billion to Pakistan.
“I am concerned because our relationship with the international financial community has not improved over the last few months. The deterioration comes in terms of substance and communication. If we want to avoid default, we have to have a constructive relationship with those who are there," Baqir said.
"We cannot antagonise the people whose generosity we need. But it looks like that is not where it is headed," he was quoted saying.
“I always try to be cheerful in public communication. But it comes down to this: if you are a company or person who needs financial support to get through, it is the first step to have a constructive relationship with whatever financial institution will give you that support,” Baqir told a packed hall.
Titled ‘The root causes of Pakistan’s Economic Crisis and How to address them’, the all-male discussion panel also featured economist Ishrat Hussain, Zafar Masud and former chairman of Federal Bureau of Revenue (FBR) Shabbar Zaidi.
With reserves at critical levels for the past several months, Pakistan was expected to get around USD 1.2 billion from the IMF in October last year as part of the Extended Fund Facility's ninth review.
But almost eight months later, that tranche has not materialised as the Fund says Pakistan has been unable to meet important prerequisites.
Just weeks away from its expiry, the programme’s ninth review is still in the doldrums, while the tenth review, which was originally part of the plan, is all but out of the question, according to the report.
It is feared that Pakistan might default on external financing commitments without the active support of the fund.
Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.
While the country struggles to keep the threat of default at bay, experts are worried that the economic situation may get worse by the end of this year without the support of the IMF.