After 10 days of “tough” negotiations intended to release crucial funds for the cash-strapped country, Pakistan and the International Monetary Fund (IMF) could not reach a staff-level agreement to revive the ninth IMF program.
The development comes as talks in Islamabad between the local authorities and the international lender, who was in Pakistan at the government’s request, ended on February 9. The talks took place from January 31 to February 9.
Ishaq Dar, the finance minister, was scheduled to hold a press conference for the eagerly anticipated return of the program, but the financial czar made no official announcement.
Hamed Sheikh, the finance secretary, said in a late Thursday night statement that “an agreement has already been struck with the IMF on prerequisite measures” without providing additional information.
“The discussions with the IMF have come to an end. However, the Memorandum of Economic and Financial Policies [MEFP] document has been delivered to Pakistan by the IMF,” he continued.
The secretary emphasized that the international creditor had promised to reach a staff-level agreement with Pakistani authorities in the coming days and that the “agreement for releasing the loan will also be signed soon.”.
All issues between the IMF and Pakistan have been resolved, according to Sheikh, who also noted that the mission of the Washington-based lender had evaluated the sources of foreign inflows.
It should be noted that the IMF expressed concerns regarding the Ministry of Finance’s projections regarding the inflows of external financing from multilateral, bilateral creditors, as well as in the form of commercial loans, during the policy-level discussions.
He also stated that after receiving approval from Washington, the IMF mission, led by Nathan Porter, would issue a more detailed statement.
The State Bank of Pakistan’s (SBP) foreign exchange reserves have decreased to $2.91 billion, barely enough to cover imports for 0.58 months. This makes the IMF loan essential for the $350 billion economy of the nation.
The $6 billion bailout package, which former prime minister Imran Khan initially agreed to in 2019, was repeatedly put on hold after his administration violated its tax collection obligations and commitments to subsidy agreements while operating with a massive budget deficit.
As a result of the seventh and eighth reviews of the Extended Fund Facility (EFF), the current coalition government resumed the program and received approximately $1 point 17 billion in August.
However, the program encountered another snag in September, when the ninth review was scheduled, as a result of the authorities’ failure to keep their word to the lender and the introduction of numerous fiscal measures that were contrary to the terms set forth.
Later, as the foreign exchange reserves continued to shrink to dangerously low levels, the federal government was forced to take the risk and agreed to adhere to the IMF’s requirements to avoid the pains of default that would have led to an inflation-wracked Sri Lanka-like situation in the nation.
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