The International Monetary Fund (IMF) has asked Islamabad to provide external financing assurances before it takes the next step with Pakistan to release the bailout tranche, reported Geo News.
“Timely financial assistance from external partners will be critical to support the authorities’ policy efforts and ensure the successful completion of the review [with Pakistan],” said Julie Kozack, the IMF’s Director of Strategic Communications in a press briefing.
It should be noted that Pakistan and the IMF have been negotiating since early February on an agreement that would release USD 1.1 billion to the cash-strapped, nuclear-armed country of 220 million people and its supercritical for the liquidity-challenged country, whose deficient foreign exchange reserves needed an urgent shoring up.
The funds are part of a USD 6.5 billion bailout package the IMF approved in 2019 — vital to Pakistan to avert defaulting on external payment obligations, reported Geo News.
The IMF wants Pakistan to get the assurance of up to USD 7 billion to fund this fiscal year’s balance of payments gap. Finance Minister Ishaq Dar has been saying it should be around USD 5 billion.
The deal will also unlock other bilateral and multilateral financing avenues for Pakistan to shore up its foreign exchange reserves, which have fallen to four weeks’ worth of import cover, reported Geo News.
“Ensuring that there is sufficient financing to support the authorities is the paramount priority. A Staff Level Agreement (SLA) will follow once the few remaining points are closed,” she said, adding financing assurances were a standard feature of all IMF programs.
“We do need to ensure that we have those financing assurances in place in order for us to be able to take the next step with Pakistan,” she added.
Kozack, when asked about the status of talks with Pakistan, said that discussions were ongoing between IMF staff and the Pakistani authorities toward an SLA on policies to complete the ninth review of Pakistan’s extended Fund Facility (EFF), reported Geo News.
The IMF spokesperson also said that Pakistan’s economy faces multiple challenges, including slowing growth, high inflation and large financing needs. “And of course, this is all coming on the back of devastating floods,” she said.
A long-awaited loan agreement between Pakistan and the International Monetary Fund (IMF) will be signed once a few remaining points, including a proposed fuel pricing scheme, are settled, an IMF official confirmed on Friday, reported Geo News.
The latest issue is a plan, announced by Prime Minister Shehbaz Sharif last week, to charge affluent consumers more for fuel, with the money raised used to subsidise prices for the poor, who have been hit hard by inflation, which in February was at its highest in 50 years.
The scheme is planning a difference of around 100 Pakistani rupees (35 US cents) a litre between the prices to be paid by the rich and poor, according to the petroleum ministry.
With enough foreign reserves to only cover about four weeks of necessary imports, Pakistan is desperate for the IMF agreement to disperse a USD 1.1 billion tranche from a USD 6.5 billion bailout agreed upon in 2019.