Tuesday June 25, 2024

More delay in revival of IMF’s Pakistan programme likely

Pakistan and IMF are holding talks to resume stalled funding of $1.1 billion since November of last year

By Ashraf Malkham
May 08, 2023
The International Monetary Funds logo. — AFP/File
The International Monetary Fund's logo. — AFP/File

ISLAMABAD: Despite Pakistan taking multiple measures to win over the International Monetary Fund (IMF), it seems unlikely that the global lender will release the crucial tranche for the country under the Extended Fund Facility (EFF), as the country's loan programme is not on the agenda of the lender’s Executive Board meetings till May 17.

Pakistan and the IMF have been discussing fiscal policy measures in the ninth review since February, aiming to resume stalled funding of $1.1 billion due in November from a $6.5-billion programme agreed in 2019.

Pakistan is trying to reach a deal with the Fund as other multilateral lenders have set the revival of the IMF programme as a precondition to unlock funding.

The IMF funding is vital for Pakistan to avert a default on its external payment obligations during a balance of payment crisis, in which foreign exchange reserves have shrunk to just four weeks of controlled imports.

According to sources, the global lender is not satisfied with the assurances given to it by Pakistan’s friendly countries.

Officials of the finance ministry, who spoke on the condition of anonymity, shared that Pakistan has fulfilled multiple conditions set by the lender for the revival of the loan facility. They added that the staff-level agreement on the ninth review was supposed to be signed by February 9.

They further said that the delay in the IMF programme is likely to affect the budget planning which is expected to be tabled in the second week of June.

Last week, IMF mission chief in Pakistan Nathan Porter said the lender was working with Pakistan to conclude a ninth review of the bailout programme.

"The IMF continues to work with the Pakistani authorities to bring the ninth review to conclusion once the necessary financing is in place and the agreement is finalised," mission chief Nathan Porter said in a statement to Reuters.

"The IMF supports the authorities in the implementation of policies in the period ahead."

This included technical work to prepare the budget for the fiscal year 2024, set to be passed by the National Assembly before end-June, he added.

As part of the conditions, Pakistan has given an assurance that its balance of payments gap this fiscal year, which ends in June, is fully funded.

Pakistan has announced pledges worth $3 billion in financing support from Saudi Arabia and UAE, but the funds have yet to come through. Longtime ally China has rolled over and refinanced its loans.

Islamabad and the IMF have had differences over the gap. It was not clear if the Saudi, UAE and Chinese financing would be sufficient, or if more external support would be needed.

It was also not immediately clear why the lender wanted to work on the technical preparation of the budget, which is not covered by the programme.