Pakistan, IMF start crucial bailout talks

ISLAMABAD: Pakistan started talks with the International Monetary Fund (IMF) on Wednesday over the country’s possibly 13th bailout program to buoy its foreign exchange reserves that have sagged 42 percent since January.

The IMF mission, led by its chief Herald Finger, kicked off nearly two weeks talks with Pakistani team on the formal written request of Islamabad for a possible bailout package.

The size of the IMF program will be determined after finalising package from China as Pakistan’s high powered technical team led by Secretary Finance Arif Ahmed Khan and Governor SBP Tariq Bajwa is scheduled to visit Beijing from November 9, 2018 for finalising package for a balance of payment support.

Pakistan is in need of an estimated $12 billion to support its external account sector for the current fiscal year of 2018/19. The country’s foreign reserves have plummeted 42 percent since January to around eight billion dollars, barely sufficient to cover two months of imports.

“The initial three to four days (of the IMF talks) are for technical discussions,” Finance Ministry spokesman Noor Ahmed told Reuters. “Thereafter, there will be policy dialogue on the specific contents of the program.”

Pakistan last month announced a $6 billion assistance package from Saudi Arabia, split into $3 billion in foreign currency support and a further loan worth $3 billion in deferred payments for oil.

Officials said Pakistan and the IMF mission will evolve agreement on memorandum of economic and financial policies and then sign of letter of intent to secure a 36-month extended fund facility loan. The country ended its three year $6.6 billion program in September 2016.

“There are still chances that a deadlock may occur during the talks if IMF mission places tough conditions,” a senior official told The News requesting anonymity.

Officials said there are three scenarios. Firstly, the two crucial documents might be signed and dispatched to the Fund’s executive board. Secondly, both sides agree to continue dialogue. And, thirdly there might be non-agreement.

“If everything goes well in the next two weeks then the IMF mission chief Herald Finger will hold a press conference on the eve of conclusion of talks on November 20,” another official said. The IMF mission will stay in Islamabad till November 20.

Officials said both sides will have to reconcile macroeconomic and policy framework, legal language, attached conditions and many other complex subjects and work out exact financing gap during the program period and possible size of funding.

“There is another possibility that the IMF may issue only a press statement if both sides could not evolve consensus on macroeconomic and fiscal policy framework during the talks,” the official added.

Officials said the IMF mission will not visit other cities of Pakistan during their stay amid security concerns and their movement will be confined only within the federal capital.

The first round of talks will be done to work out technical details during the first 10 days and in case of agreement on broader macroeconomic and fiscal framework with minute details the policy level talks will begin for three to five days in which the size of the IMF program and conditions will be negotiated with the Pakistani team.

Minister for Finance Asad Umar will lead Pakistani side during the policy level talks.

In the first phase of technical talks, Secretary Finance, Governor State Bank of Pakistan and Chairman Federal Board of Revenue will lead their respective areas of parleys.

Federal secretaries from ministries of petroleum, power division, commerce and other officials will also brief the IMF on different issues that the economy is current facing.