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Saturday April 20, 2024

No-trust motion delaying agreement with IMF

Political uncertainties have made it impossible for both sides to strike a consensus on the MEFP framework

By Mehtab Haider
March 15, 2022
IMF’s Resident Chief Esther Perez Ruiz says the Pakistani authorities and the IMF will continue to discuss recent developments and other measures to promote macroeconomic stability.
IMF’s Resident Chief Esther Perez Ruiz says the Pakistani authorities and the IMF will continue to discuss recent developments and other measures to promote macroeconomic stability. 

ISLAMABAD: The political crisis in the country is looming over the ongoing staff-level review talks between IMF and Pakistan and a decision on the next loan tranche is likely after an outcome on confidence move due later this month, officials said on Monday.

With no possibility of striking staff-level agreement until the fate of no-confidence move is settled, Pakistan and the IMF will continue holding ongoing parleys for an indefinite period for striking consensus on many thorny issues.

Both the IMF and Pakistani authorities confirmed to The News separately on Monday that the ongoing talks were continuing but none of them gave any time frame when these ongoing virtual talks for completion of the 7th review would be concluded mainly because uncertainties persist on the political horizon.

It has made it impossible for both sides to strike a consensus on a memorandum of economic and financial policy (MEFP) framework under the IMF programme. Both sides are indicating that the talks will continue and the staff-level agreement will only be possible when the fate of the no-confidence motion is decided.

When the IMF’s Resident Chief Esther Perez Ruiz was contacted about the timeframe for the conclusion of ongoing talks, she replied, “the authorities and the IMF will continue to discuss recent developments and other measures to promote macroeconomic stability”. This scribe also contacted Finance Minister Shaukat Tarin, who said that the talks are “continuing”. One top official explained to this scribe that the tax amnesty scheme for the industrial sector did not require waiver because it was not part of performance criteria, it was part of missed structural benchmarks which are assessed in the context of overall program performance. The official said that the major challenge for striking consensus on MEFP was evolving consensus on external front projections in the wake of increasing current account deficit because the Fund’s projections proved wrong. The IMF had projected that the current account deficit would be standing at $12.9 billion for the current fiscal year but it had already touched $11.6 billion in the first seven months (July-Jan) period. If the CAD target was revised upward in the range of $18 to $20 billion for the whole fiscal year 2021-22 then the question arises from where external financing of $5 to $7 billion would be bridged to avoid depletion of foreign currency reserves. The rising POL and commodities prices in the international market multiplied the woes of the economic managers but keeping in view increased vulnerabilities on economic and political fronts they did not have much space to manoeuvre through policy prescriptions.