ISLAMABAD: Talks between Pakistan and the International Monetary Fund (IMF) are ongoing, with both sides yet to sign a broader agreement on a revised macroeconomic framework for the current fiscal year, JEE News reported. Reported with reference to sources.
Delays in negotiations could delay the completion of the ninth review and the release of the $1 billion tranche until the next calendar year, 2023.
Talks continued for weeks but the two sides could not decide to start policy-level talks to conclude the pending ninth review by November.
Both Pakistan and the international lenders are silent and nobody is ready to say anything on the record but background discussions suggest that the revised macroeconomic/fiscal framework developed by Islamabad and the IMF Negotiations were deadlocked due to differences over sharing with
Now Pakistan will have to work hard to complete the revision by the first week of December 2022. If the talks conclude next month, the IMF will eventually release the next installment in January 2023 as the Christmas and New Year holidays begin after December 20. So the executive board of the global lender will meet next year to approve Pakistan’s next tranche.
The News had contacted officials of both the IMF and the Finance Ministry to inquire about the exact schedule for completing the pending review. A close aide of Finance Minister Ishaq Dar said, “Discussions were going on on Zoom. Inshallah soon (the review will be over).
The IMF is objecting to the revised macroeconomic/fiscal framework for 2022-23 as it believes the targets were unrealistic and contrary to ground realities.
The government envisioned nominal growth in the 25 percent range, with two percent real GDP growth and an average inflation rate of 23 percent, but the rest of the figures did not match the revised nominal growth figures.
The government has maintained the Federal Board of Revenue (FBR) annual target of Rs 7.47 trillion. However, the IMF believes that the tax collection may face a shortfall due to the compression of imports. Secondly, the FBR figure did not match the nominal growth figure of 25 percent, so if the FBR achieves its target, the tax-to-GDP ratio will fall further. Third, the non-tax revenue target of Rs 2 trillion may not be met.
The IMF noted that the petroleum development levy may not be fully realized as the government had envisaged a target of Rs 855 billion before the next budget. Now the levy target can be reduced to Rs 500 billion mainly due to the reduction in diesel price by Rs 50 per liter by the government and a 21% reduction in the consumption of petroleum products.
The government’s inability to reform and legislate in the energy sector was also hampering consensus.
Delays in finalizing the IMF deal could add to the country’s economic woes amid dwindling foreign exchange reserves of $7.8 billion held by the State Bank of Pakistan (SBP).
State Bank is going to return $1 billion on maturity of sukuk bond within this week. The Asian Infrastructure Investment Bank is going to provide a $500 million loan as its board has already approved. Reserves at the central bank will fall further, reaching around $7 billion in the next two weeks.
