SBA: IMF awaits formation of PM Shehbaz's cabinet ahead of sending mission for 2nd review

The International Monetary Fund (IMF) has said it “stands ready” to send its mission to Pakistan for the second review of the Stand-by Arrangement (SBA) after a new cabinet is formed.

In a press briefing, Julie Kozack, the IMF’s Director of Strategic Communications, stated: “The IMF stands ready to hold a mission for the second review of the Stand-by shortly after a new cabinet is formed.

“The focus, therefore, is currently on completion of the current Stand-by program, which ends in April 2024. We look forward to working with the new government on policies to ensure macroeconomic stability,” she said.

Pakistan held its General Elections last month, but delays in first issuing the results, and formation of a coalition government have meant the process of a new setup has taken time.

Shehbaz Sharif took oath as prime minister on Monday, but his cabinet has yet to be formed with coalition partners seemingly dragging their feet on various choices.

There is also intense speculation on the choice of finance minister with various names being floated.

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When queried about IMF's assessment of Pakistan's external financial needs for 2024 and the size of the next IMF programme Kozack said on January 11, the IMF Executive Board approved the first review of the SBA with Pakistan, bringing total disbursements under the Stand-by to about $1.9 billion.

“The SBA-supported programme underpins the authority’s efforts to stabilise the economy with a strong emphasis on protecting the most vulnerable segments of the population,” she said.

The IMF official lauded the role of the caretaker government for maintaining “economic stability” in the country.

“During the period of the caretaker government, the authorities have maintained economic stability through strict adherence to the fiscal targets while protecting the social safety net, maintaining a tight monetary policy stance to control inflation, and continuing to build foreign exchange reserves. And this has been done at the same time as implementing timely adjustments in tariffs to shore up the viability of the energy sector,” she said.

The IMF representative was also asked to comment on "political instability" in Pakistan.

"I'm not going to comment on politics.

“Only to say that the IMF stands ready, as I said, to send a mission after a new cabinet is formed, and we look forward to working with the government to ensure stability, macroeconomic stability, for the good of the people of Pakistan,” said Kozack.

Pakistan averted default last summer thanks to a short-term IMF bailout, but the programme expires next month and a new government will have to negotiate a long-term arrangement to keep the $350-billion economy stable.

On Monday, newly-elected Prime Minister Shehbaz Sharif directed authorities concerned to “immediately engage” with the IMF to advance discussions regarding the Extended Fund Facility (EFF).

Last month, Bloomberg News, citing a Pakistani official, reported that Pakistan plans to seek a new loan of at least $6 billion from the Fund to help the incoming government repay billions in debt due this year.

The country will seek to negotiate an EFF with the IMF, the report said, adding that the talks with the global lender were expected to start in March or April.

Ahead of the bailout, the South Asian nation had to undertake a slew of measures demanded by the IMF, including revising its budget, a hike in its benchmark interest rate, and increases in electricity and natural gas prices.

In an interview last week, US Ambassador to Pakistan David Blome also said the path for the new government is clear.

“One of the first things, in all likelihood, the new government will have to address will be finding a way ahead with a new IMF programme," he said.

"We certainly encourage it to work with the IMF on reforms that make sense for Pakistan, and help it break the cycle of indebtedness and required international financing that constrains other kinds of things for any country that’s involved with it,” he added.