ISLAMABAD: Talks between Pakistan and the International Monetary Fund (IMF) are at a standstill as the global lender seeks to keep Islamabad on track with bailout program targets and complete the pending ninth review. is pushing for reforms, a fund official told JEE News.
An important objective of program evaluations in Pakistan, as in all program countries, is to assess program performance, as well as, with respect to the future, whether the program is on track or policy to meet program goals. Actions are needed, advancing reform goals, and maintaining macroeconomic stability going forward,” said Esther Perez Ruiz, IMF Resident Chief in Pakistan, in a written response.
The IMF’s review for the release of the next tranche under the bailout funding has been pending since September. However, Finance Minister Ishaq Dar claimed last week that Pakistan had met all the targets of the review.
However, the IMF’s resident chief said discussions with the Pakistani authorities are ongoing in these areas, particularly as not all quantitative targets have been met by the end of September.
“There have been significant new developments since the last program review, including unusual flooding and a number of new initiatives and developments, which affect this year’s economic outlook,” added Ruiz.
Sources familiar with the discussions told the publication that the global lender has told the finance ministry it needs to meet all end-quarter performance benchmarks and targets.
“Both parties will also need a broader agreement on future data based on which performance targets and indicator targets will be set for the remainder of the program period up to June 2023,” he added.
After the devastating floods, the IMF and Pakistan revised the entire macroeconomic and financial framework so that both sides could agree on it.
A broader agreement on a revised macroeconomic framework could pave the way for consensus building on a staff-level agreement to complete the 9th review under the $7 billion Extended Fund Facility (EFF).
With the revised figure for nominal growth in the 25 percent range, the tax-to-GDP ratio will come down if the FBR achieves its annual target of Rs 7.47 trillion for the current fiscal. Without agreement on revised figures, it will be difficult to reach an agreement between the two parties.
Pakistani officials remain hopeful that the ninth review will be completed soon, paving the way for the release of the next tranche of nearly $1 billion for Pakistan’s struggling economy.
Amid dwindling foreign exchange reserves that hit $7.5 billion, Pakistan needs an injection of dollar inflows to gain breathing space.
The prospect of more deposits from the friendly country will put the authorities in a better position to negotiate a better deal with the IMF, but if no deposits are made in the next two weeks, foreign exchange reserves could dwindle further in the coming weeks.
Stocks Crashed.
Meanwhile, the stock market reacted negatively on Monday and fell sharply due to the delay in the IMF review.
The benchmark KSE-100 shares index of the Pakistan Stock Exchange (PSX) fell 537.43 points (1.28%) to close at 41,612 points after hitting an intraday low of 635 points.
After a slightly positive start, the market succumbed to massive profit-taking, Topline Securities said in its daily market report.
“The sell-off jitters can be attributed to investor jitters over the impasse in the IMF’s ninth review and subsequent approval of the $1.2 billion loan tranche,” the brokerage said.
