Thursday July 18, 2024

Pakistan-IMF staff-level agreement likely next week

Pakistan, IMF hold virtual meetings, almost evolve consensus on fiscal framework for current fiscal year

By Mehtab Haider
February 17, 2023
The International Monetary Funds (IMF) building in Washington, United States. — AFP/File
The International Monetary Fund's (IMF) building in Washington, United States. — AFP/File

ISLAMABAD: Pakistan and the IMF are expected to strike a staff-level agreement next week as the State Bank of Pakistan (SBP) is scheduled to engage with the Fund mission on monetary policy and foreign exchange reserves targets for the end of June 2023.

Pakistan and the IMF sides held virtual meetings on Thursday night and both sides almost evolved a consensus on the macroeconomic and fiscal framework for the current fiscal year.

The uncertainty in the markets is playing havoc with the economy as the government wants to move towards striking the staff level agreement as early as possible. “The last two auctions for generating domestic debt have failed to get the desired results mainly because markets are expecting upward adjustments in policy rates,” official sources said.

The IMF wants real interest rate from negative to positive, so the SBP will have to hike the discount rate at least by 200 basis points.

The government had sought real GDP growth rate target of 1.5 to 2 percent while CPI based inflation at 29 percent without taking into account fiscal and energy sector adjustments undertaken by the government under the prescriptions suggested by the IMF. “InshaAllah, we expect that the Staff-Level Agreement (SLA) will be signed next week,” top official sources said while talking to The News here on Thursday night.

Earlier, Minister of State for Finance Aisha Ghaus Pasha said the IMF has shown its satisfaction over the measures taken by the government to generate additional revenue of Rs170 billion through supplementary finance bill, but they were surprised at the speedy implementation of agreed steps.

She further disclosed that the IMF was also engaged with Pakistan’s friendly countries, including Saudi Arabia, the UAE and China, with respect to external financing needs of the country and would apprise the Executive Board.

The minister said that external financing was discussed with the Fund. “Our talks with friendly countries on external financing are going on and have progressed and we are optimistic that things will move forward.”

The policy-level agreement was reached with the IMF mission before they left the country, however on some wording/language, the government sought details, she added.