IMF to discuss Pakistan’s budget plans

ISLAMABAD: The International Monetary Fund (IMF) is preparing to discuss Pakistan’s budget plans for the coming financial year, as part of a long-awaited bailout tranche from the lender for the cash-strapped nation, the IMF’s Pakistan mission chief said on Thursday.

Negotiations over key budget targets such as the fiscal deficit are one of the last hurdles before the IMF approves a staff-level agreement to release $1.1 billion in funding, which has been delayed for months, that is crucial for Pakistan to resolve an acute balance of payments crisis.

A successful staff-level agreement (SLA) for the 9th Review, which has been pending since November, will unlock the $1.1 billion tranche. The funding is part of a $6.5 billion bailout package the IMF approved in 2019, which is due to end in June, prior to the budget.

“In all IMF programmes, the authorities issue a letter of intent associated with the last review outlining their policy intentions for the period after the programme,” said Nathan Porter, mission chief to Pakistan.

Pakistan has been in economic turmoil for months with an acute balance of payments crisis while talks with the IMF to secure a $1.1 billion tranche have not been successful. Inflation surged to a record 36.4 percent in April from a year earlier, driven mainly by skyrocketing food prices and rising energy costs. The finance ministry projected that inflation would rem­ain in the range of 36-38 pc mainly due to the rupee’s depreciation and rising administered prices, which contributed to the increase in overall prices.

Last month, IMF Chief Managing Director Kristalina Georgieva said the Fund hoped to complete its current programme with Pakistan successfully. Responding to a question about IMF-Pakistan talks for the revival of the 2019 loan package, Georgieva said: “We have been working very hard with the authorities in Pakistan within the context of our current programme to make sure that Pakistan has the policy framework that makes it possible to avoid what you are talking about.”

The reporter who asked the question had hinted at the possibility of Pakistan’s burgeoning debt becoming unsustainable. But Georgieva said the purpose of the IMF-Pakistan talks was to avoid getting to a point where the country’s debt may become unsustainable.

“We are not there yet and it’s better not to get there,” she said. The IMF and Pakistani officials, she said, were also discussing how to support Pakistan “in terms of providing financial assurances so we can complete the programme”.