Finance Minister Mohammad Aurangzeb confirmed that talks between Islamabad and the IMF regarding the $3 billion Stand-By Arrangement (SBA) are set to begin this week. The government plans to formally request assistance from the IMF to stabilize Pakistan’s struggling economy, reported on Tuesday.
Responding to queries about the possibility of initiating formal discussions with the IMF, Aurangzeb, who participated in the federal cabinet’s inaugural session at the President House, expressed optimism that talks with the IMF staff would start this week.
Sources indicate that Pakistan will reach out to the IMF headquarters in Washington DC via email to invite its review team to Islamabad for discussions and the disbursement of the final tranche worth $1.1 billion.
The government, led by Prime Minister Shehbaz Sharif, may also propose talks for a new medium-term bailout package, seeking an Extended Fund Facility (EFF) of $6 billion. Additionally, there are plans to secure additional financing from the IMF for climate-related initiatives, potentially totaling $1.5 to $2 billion beyond Pakistan’s allocated quota.
Last week, it was reported that Pakistan would initiate crucial talks with the IMF to complete the second review under the $3 billion SBA program. Formal invitations were expected to be sent after the formation and inauguration of the federal cabinet.
Meanwhile, Aurangzeb acknowledged that the current fiscal year of 2024 would present significant challenges for Pakistan’s economy. He emphasized the need for action rather than mere discussion.
During his oath-taking ceremony at the Presidency, Aurangzeb pledged to devote his efforts to addressing Pakistan’s economic and financial challenges. When questioned about the IMF program, Aurangzeb refrained from commenting, stating that he required briefings before providing a response.
On another note, former finance ministry economic advisor Dr. Ashfaque Hasan Khan revealed concerns regarding the IMF program’s impact on Pakistan’s defense budget. He claimed that India had influenced the IMF to prevent IMF funds from being diverted towards Pakistan’s defense budget.
Dr. Ashfaque outlined four key recommendations for Pakistani negotiators engaging with the IMF: gradual reduction of the policy rate, avoidance of further currency devaluation, prioritization of budget deficit over primary surplus, and emphasis on reforms over policy adjustments.
