A virtual meeting between Dar and an official of the fund was held.
ISLAMABAD: Pakistan requested the International Monetary Fund (IMF), on Wednesday for the purpose to show some flexibility & sign the staff-level deal. Despite Islamabad’s increasing concerns about the negative consequences of a deteriorating economic crisis, it was still unable to secure a date.
Finance Minister Ishaq Dar requested financial assistance from the International Monetary Fund (IMF) during a virtual meeting with Jihad Azour, the International Monetary Fund’s director for the Middle East and Central Asia Department. However, the request was denied as the IMF raised concerns about possible fiscal leakages resulting from the implementation of a petrol subsidy plan. The two sides also discussed the progress made on the IMF program, including talks held during the IMF mission’s visit to Pakistan and the implementation of prior actions, according to a press statement from the finance ministry.
According to sources, the minister has urged the International Monetary Fund to refrain from raising concerns about the petrol subsidy and objecting to the clarification sought by Prime Minister Shehbaz Sharif regarding the announced schemes.
Sources reported that Dar made a request to the International Monetary Fund to reduce the required foreign loan amount by an additional $1 billion to $5 billion, citing improvements in the current account deficit. The IMF had already reduced the requirement by $1 billion to $6 billion the previous month.
Sources reported that Dar gave assurance to the International Monetary Fund that the government may not implement the petrol subsidy scheme, and therefore, the IMF should not raise the issue further. The minister emphasized the need for flexibility on the part of the IMF and urged them to consider Pakistan’s progress towards reaching a staff-level agreement at an early stage.
The International Monetary Fund has delayed the approval of a $1.1 billion tranche and disbursements by other multilateral institutions due to a delay in finalizing the agreement for the 9th review.
A press statement from the Ministry revealed that Finance Minister Ishaq Dar confirmed that all prior actions for the 9th review under the Extended Fund Facility had been completed and the government of Pakistan was fully committed to fulfilling its obligations as agreed with the IMF. According to sources, Dar highlighted the unprecedented nature of meeting prior actions before signing a staff-level agreement, yet the International Monetary Fund was not prepared to sign the deal.
Sources reported that the International Monetary Fund maintained the view that all issues would remain unsettled until the deal was ratified by its executive board, regardless of whether a country met the prior actions before or after the staff-level agreement.
The delay was causing economic losses to Pakistan, and Finance Minister Dar requested Nathan Porter, the IMF’s Mission Chief to Pakistan, to provide reasons for the delay during their meeting. Despite Pakistan implementing a mini-budget, raising electricity and gas prices, and allowing market forces to determine the exchange rate, the desired results were not achieved.
The finance ministry stated that Dar informed the IMF team about the economic challenges faced by Pakistan, and Jihad Azour, the IMF’s Director for the Middle East and Central Asia Department, expressed confidence that a staff-level agreement (SLA) would soon be signed, followed by International Monetary Fund Board approval. Azour hoped that Pakistan would continue to make progress on reforms in various sectors and complete the IMF program on time, and that the IMF would play a positive role in bringing economic stability to Pakistan.
External Financing problem
During a meeting between Pakistan and the International Monetary Fund, both sides discussed Pakistan’s external financing requirements of $6 billion until June to avoid default, according to sources. The International Monetary Fund shared that Saudi Arabia had confirmed its lending of $2 billion to Pakistan, but the UAE’s confirmation was still pending. Finance Minister Ishaq Dar assured the IMF that the UAE would soon confirm its commitment to provide $1 billion.
According to sources, Finance Minister Ishaq Dar requested the International Monetary Fund to reduce Pakistan’s external financing requirement to $5 billion from $6 billion, citing an improvement in the current account deficit. The sources added that the $6 billion financing gap was calculated based on the assumption that the current account deficit would be around $7 billion in the current fiscal year. However, during the first eight months of the fiscal year, the current account deficit stood at $3.9 billion.
Dar assured the IMF that if the staff-level agreement was signed, Pakistan would be able to arrange the additional $2 billion loan from the World Bank, the Asian Infrastructure Investment Bank and commercial banks. However, the IMF was asking for the arrangement of commercial loans before signing the staff-level agreement, a demand that Pakistan is unable to meet without the IMF’s support.
Read also: Ishaq Dar says details of agreement with IMF to be made public
During the meeting, the IMF informed Dar that Saudi Arabia had confirmed lending $2 billion to Pakistan, but confirmation from the United Arab Emirates was still pending. Dar assured the IMF that the UAE would soon confirm its commitment to provide $1 billion.
