ISLAMABAD: Pakistani officials are expecting the International Monetary Fund (IMF) to share draft economic and fiscal policies with them today despite differences over external financing needs and power sector losses.
Negotiations between Pakistan and the IMF were scheduled to take place from 31 January to 9 February 2023 to conclude staff-level agreements on the completion of the ninth review and the release of a $1 billion tranche under the $6.5 billion Expanded Fund Facility (EFF). Signing can be attempted. ) which was signed by the Pakistan Tehreek-e-Insaf government in 2019.
The Shahbaz Sharif-led government is in a catch-22 situation due to the tough conditions imposed by the lender and the political cost of these measures in an election year.
Prime Minister Shehbaz – addressing the Azad Jammu and Kashmir Legislative Assembly in Muzaffarabad on Sunday – said that “the country is facing a lot of financial challenges”, the IMF is “combing every book” and “every thing” and examining “every subsidy”. Negotiations continue on the ninth review of the $6.5 billion loan program.
Change in IMF strategy
In keeping with the last assessments, the two parties took a long time to sign the staff-level agreement even after receiving the MEFP document and nine tables. But, according to Pakistani officials, now the IMF mission has changed its modus operandi – they will first finalize the agreement and then share the MEFP.
According to JEE News, if a consensus is not reached today, the IMF mission may extend its stay or announce the continuation of negotiations through online meetings from Washington, DC.
Nathan Porter meets Isaac Darr.
On Wednesday, IMF Mission Chief Nathan Porter had a one-on-one meeting with Finance Minister Ishaq Dar at the Prime Minister’s House.
According to a statement issued by the Ministry of Finance in Syria, the talks with the IMF continued on Wednesday and focused on the financial table, financing etc.
“There is a broad consensus on corrective actions and measures. The head of the mission also met the finance minister and briefed him on the discussions.” The statement added that the IMF mission is working on integrating all of them and will finalize the MEFP.
External transportation
Sources said the IMF had expressed doubts about the dwindling dollar inflows, so without confirmation from multilateral, bilateral and commercial banks all the way through, the fund delegation from 9 billion to 12 billion. cannot meet the gross external financing needs of the dollar.
This level of external financing is required for the remaining five-month period to June 30, 2023, if reserves held by the State Bank remain at around $3 billion.
However, if the country needs to build foreign exchange reserves of more than $3 billion, it will have to increase dollar inflows further. Therefore, the path to securing a large dollar inflow is the most difficult thing to do in a difficult environment.
The IMF expressed its disquiet over the projections made by the Ministry of Finance on the inflow of external financing in the form of multilateral, bilateral creditors and commercial loans.
The government disclosed trade loans of $2 billion from Saudi Arabia, $1 billion from the United Arab Emirates and $3.6 billion.
World Bank program loans and AIIB co-financing are also placed in the risk zone. Since the refinancing period is over, the government will have to negotiate new terms and conditions for acquiring commercial loans, taking into account the increased risks of credit rating deterioration and default. If the overall external financing requirements are not met, the country’s foreign exchange reserves cannot be increased to the desired extent.
The short-term risk of a country’s default will remain, so the IMF does not want to hold it accountable in such a critical position.
Prime Minister approved the proposals.
Meanwhile, Dr. Ayesha Ghous told reporters that Prime Minister Shehbaz Sharif has approved the steps required to restore the IMF program.
He said that the government will provide protection to the common citizens while the wealthy class will have to pay the price of high consumption of electricity.
The minister said both sides are close to clarity and hoped that the MEFP would be shared soon and an agreement would be reached within the stipulated time frame.
