IMF talks: Leaving without agreement 'not uncommon', says former SBP deputy governor

The departure of the International Monetary Fund (IMF) mission from Pakistan without inking a deal is “not uncommon”, said former deputy governor State Bank of Pakistan (SBP), Dr Murtaza Syed, adding that things would worsen for the crisis-hit country if reaching an agreement with the global lender takes longer than a month.

The IMF had sent a mission to Pakistan to hold talks with the government, and it appears Pakistani authorities have been unable to reach a staff-level agreement at this stage.

The IMF said virtual discussions will continue in the coming days, suggesting that there may be some time before Pakistan can officially revive the IMF programme

IMF stresses on ‘timely, decisive’ implementation of policies as virtual discussions to continue

In a series of tweets Dr Syed, who previously served as an advisor at the IMF, said he was not privy to any of the discussions held between the Pakistani authorities and the international lender, but based on previous experiences at the Fund and negotiating with them, gave his two cents.

“For an IMF team to leave town without an agreement is not that uncommon in program reviews. It has happened before in other countries. It has also happened before in Pakistan,” said Dr Syed.

“There are often some differences that remain or steps that need to be taken before an agreement can be inked,” he said.

“The key issue is how large the differences that remain are,” said the ex-SBP official.

“Sometimes, they are not that significant and just need a few days to settle. In these cases, the discussions can be concluded virtually and an agreement reached fairly soon after the mission has returned to Washington DC,” he said, adding that further information on the issues will become available in the coming days.

“Some finite time in reaching an agreement should not be too big an issue. But if it drags on for say longer than a month or so, then things get more difficult as our foreign exchange reserves have reached a critical level,” Dr Syed highlighted.

Pakistan’s total liquid foreign exchange reserves further shrunk by $202 million during the last week.

According to the State Bank of Pakistan’s weekly report issued on Thursday, total liquid foreign reserves held by the country stood at $8.54 billion as of February 3, 2023, compared to $8.74 billion as of Jan 27, 2023.

Dr Syed said that communication will be important in the interim, both from the government and the IMF. “With sentiment fragile and people generally panicky, this will require maturity and care on both sides,” he said.

“Finally, we must remember that the next step is a staff-level agreement (SLA). That will then need to be taken to the IMF Board before the next tranche of $1.2 billion is released.

“This can take up to a month after the SLA.”