| Welcome to Global Village Space

Saturday, May 18, 2024

IMF mission arrives in Pakistan for the 9th review

An International Monetary Fund mission has arrived in Pakistan to discuss the stalled ninth review of the $7 billion Extended Fund Facility.

The Fund and the Pakistani government will hold technical talks for the first four days of the meeting, where economic data from various departments would be reviewed. Secretary Finance Hamid Yakoob, State Minister Ayesha Ghous Bux, SAPMs Tariq Pasha, and Tariq are among the Pakistani delegation holding talks with IMF.

The technical level talks would continue till Friday, 3rd February. Similarly, the second phase of policy negotiations will continue till 9th February when a memorandum of economic and financial policies (MEFP) would be finalized.

Pakistan received a $6 billion IMF bailout in 2019, which was topped up with another $1 billion last year to help the country following devastating floods. However, the IMF then suspended disbursements in November 2022 due to Pakistan’s failure to make more progress on fiscal consolidation.

Prime Minister Shehbaz Sharif had also emphasized completing the ninth IMF review without any further delay, as the country is already facing a severe economic crunch. While addressing the launch of a Youth Business and Agricultural Loan Scheme, the Premier said;

“We have given the IMF a clear message that we want to complete the ninth review. We are ready and want to sit down regarding your conditions so that it can be concluded and Pakistan can move forward.”

Moreover, the IMF representative for Pakistan Esther Perez Ruiz said in a statement;

“At the request of the authorities, an in-person Fund mission is scheduled to visit Islamabad [from] January 31 – February 9 to continue the discussions under the ninth EFF review.”

The representative suggested that the mission would focus on policies to restore domestic and external sustainability. Likewise, the discussions would also focus on strengthening the fiscal position of Pakistan with durable measures supporting the vulnerable people and the flood victims. She also mentioned restoring the viability of the power sector and reversing the continued accumulation of circular debt would also be a part of the discussion. Similarly, measures to re-establish the foreign exchange market, allowing the exchange rate to clear the forex shortage are also a part of the review.

Read more: Pakistan’s economy in ‘collapse’ as IMF visits

Prerequisites for Pakistan

According to the finance ministry, the IMF has not yet responded to the new roadmap shared by Pakistan and the foreign reserves worth only $3.1 billion are left, sufficient only to cover two weeks of imports.

IMF has set a list of prerequisite actions for Pakistan, which it has to follow to release a $1 billion tranche under the EFF. The devaluation of the Rupee by a record 17% in just three days and the fuel price hike by Rs35 per liter are some of the measures that the government has taken as most- hard-pressed demands by the IMF. However, the sales tax on fuel has yet to be levied to as high as Rs 80 -100 per liter.

Read more: Pakistan asks IMF for restructuring ‘pause’

Furthermore, the Fund has also sought settlement of circular debt in the gas sector for the revival of the stalled loan program. The country has to jack up the gas price to 74% to fix the debt. Additionally, Pakistan has also been directed to take measures for Rs 300 billion in tax collection and increase the basic electricity tariff. The Fund also wants Pakistan to end the ‘artificial ban’ on the dollar exchange rate.

On the contrary, Pakistan had hoped that Saudi Arabia, China, and the UAE would provide the country with $5 billion in cash deposits to help strengthen its economic position. Unfortunately, these promises were not materialized, and Pakistan is left with no choice but to agree to the IMF’s terms.