During a virtual meeting with Jihad Azour, the IMF’s Director for the Middle East and Central Asia Department, Finance Minister Ishaq Dar urged the International Monetary Fund (IMF) to exhibit flexibility and commit to a staff-level agreement. However, no date was set, despite Pakistan’s growing anxiety about the worsening economic crisis repercussions.
The minister’s desired result remained unattained as the IMF raised concerns about petrol subsidies and possible fiscal leakages caused by the subsidy program’s execution.
Both sides examined the headway made in the IMF program, including talks with the IMF mission during its Pakistan visit and prior actions’ implementation, as mentioned in the finance ministry’s press statement.
Sources revealed that Dar asked the IMF to decrease the foreign loan requirement by another $1 billion to $5 billion after the current account deficit improved. Last month, the IMF had already reduced the requirement by $1 billion to $6 billion.
Dar reportedly assured the IMF that the government might not enact the petrol subsidy scheme, so the fund should cease raising the issue. However, the minister stressed that the IMF should display flexibility, considering Pakistan’s progress in pursuing a staff-level agreement promptly.
Due to the 9th review agreement’s delay, the IMF has held back the approval of the $1.1 billion tranche, postponing disbursements from the World Bank and other multilateral organizations.
Insiders stated that, during the meeting, Dar pressed Nathan Porter, the IMF’s Mission Chief to Pakistan, to give reasons for the deal’s delay.
Pakistan has not yet achieved the desired results despite implementing a mini-budget, raising electricity and gas prices, and allowing market forces to determine the exchange rate.
The finance ministry reported that “Jihad Azour expressed confidence that the Staff-Level Agreement (SLA) would be signed soon, followed by the IMF Board’s approval.”
The parties discussed their positions on the $6 billion external financing requirements, which Pakistan needs to avoid defaulting by June. The IMF informed that Saudi Arabia had confirmed a $2 billion loan to Pakistan, but the United Arab Emirates (UAE) had yet to confirm, according to sources. Dar assured that the UAE would soon confirm its $1 billion commitment.
Dar reportedly urged the IMF to further reduce the external financing requirement to $5 billion due to the current account deficit’s improvement. The $6 billion financing gap was based on an estimated $7 billion current account deficit for the fiscal year.
