Pakistan, IMF yet to sign staff-level agreement

ISLAMABAD: The visiting International Monetary Fund (IMF) mission Thursday shared a draft Memorandum of Economic and Financial Policies (MEFP) with Pakistani authorities and evolved a broader consensus over actions/ prior actions.

However, the Staff-Level Agreement (SLA) could not be struck.

The visiting IMF mission concluded its review parleys in 10 days and is going to leave Islamabad in the wee hours on Friday (today) to return back to headquarters in Washington DC without signing of the agreement. However, the Fund did not issue any statement till filing of this report.

Pakistani authorities delayed implementations of prior actions. Secondly, the IMF remained engaged in securing confirmation from all avenues of external financing. So the much-awaited SLA has been further delayed amid dwindling foreign exchange reserves held by the State Bank of Pakistan that has touched $2.9 billion.

The prior actions included slapping additional taxes through a mini-budget, taking steps to erase circular debt for the energy sector including hiking of electricity and gas tariffs, and increasing the policy rate for tightening of monetary stance.

“The IMF shared the draft MEFP and relevant tables with Pakistani authorities and there was a broader consensus on actions/ prior actions. Some deviations have occurred during the course of parleys contrary to the original mandate obtained by the IMF staff from Washington (Headquarters). The Fund staff requires permission in order to sign the SLA subsequently in the coming week,” Secretary Finance Hamid Yaqoob late Thursday night told the journalists, who waited for long hours in Q Block (Ministry of Finance) for getting a version of Minister for Finance Ishaq Dar on latest parleys with the IMF.

The finance secretary said that the government shared its plan to secure external financing from all avenues and the IMF did not raise any objections to the estimates.

Minister Dar left the Q Block on Thursday evening making a commitment with the journalists outside the Ministry of Finance that he would return back and would talk about the “good news” on talks with the IMF after holding the final round of parleys with the Fund mission held in the Prime Minister House.

Prime Minister Shehbaz Sharif also held a virtual meeting with the IMF mission and assured them of full implementation of all prior actions agreed upon with the Fund mission. The IMF programme was in a stalled mode from last three months as both sides could not make progress despite remained engaged from last November 2022.

The Ministry of Finance informed the journalists that they would have to wait till 10 pm and Ishaq Dar would return back from the PM House for sharing information with the media.

Later, the finance secretary established telephonic contact with the journalists at 11 pm and informed them that Pakistan and the IMF evolved a broader consensus on actions and prior actions, but the staff level agreement could not be struck.

He said that the finance minister wanted to inform the media but they will have to wait for press statement from the IMF. The issuance of IMF statement got delayed, so the secretary preferred to talk to the media for informing them about the latest developments where by the IMF shared the draft MEFP and relevant nine tables. Now the IMF would seek permission from its headquarters in Washington for signing the SLA.

The sources said that Pakistani authorities delayed implementations on prior actions due to which the draft MEFP could not be shared well on time. It should have been handed over to Pakistani authorities three days prior to the conclusion of parleys so that Pakistani side could give careful reading of the document with full understanding. If this course would have adopted then the prior actions could have implemented and shared with Fiscal Affairs Department (FAD) of the IMF based in Washington.

After seeking IMF headquarters endorsements from Washington, the Staff-Level Agreement could have been signed on the conclusion of talks on Friday. Now Pak authorities failed to sign the SLA, so the prevailing uncertainty will continue hovering over the economic horizon of the country.