Govt quite clear about what it seeks from IMF

ISLAMABAD: The International Monetary Fund (IMF) team and Pakistani authorities will begin discussion on the second review of the $3 billion Stand-by Arrangement (SBA) from today (Thursday), said the Finance Ministry on Wednesday.

An official said that the IMF team has arrived in Islamabad and will hold an opening meeting with the economic team led by the finance minister at Q-Block (Finance Ministry) on Thursday morning.

The Finance Ministry said the talks on the second review are scheduled from 14th to 18th March 2024; however, sources said that talks on the second review may continue till March 21-22.

Aurangzeb unveils his approach to IMF lending

The Finance Ministry further stated that Pakistan has met all structural benchmarks, qualitative performance criteria, and indicative targets for the successful completion of the IMF review. This would be the final review of SBA, and staff-level agreement is expected after this appraisal. Once staff-level agreement is reached, the final tranche of US$ 1.1 billion will be disbursed, following the approval of the Executive Board of the IMF, the ministry added.

An official said that the discussion on the second review would start subsequent to an opening meeting of the IMF mission with Pakistan’s economic team led by Finance Minister Muhammad Aurangzeb.

On Tuesday, the finance minister told the media that the economic team would be keen to start initial discussions on another EFF (Extended Fund Facility) with them. He added that further negotiations on the programme would be taken forward on the sidelines of the IMF and World Bank’s spring meetings next month.

REUTERS ADDS: “Pakistan has met all structural benchmarks, qualitative performance criteria and indicative targets for successful completion of the IMF review,” the ministry added, hoping for a successful IMF staff level agreement after the appraisal.

“The mission will be focused on (the) completion of Pakistan’s current SBA-supported programme, which ends in April 2024,” the fund said through a spokesperson.

The global lender has said it will formulate a medium-term programme if Islamabad applies for one.

Panda Bond

Sajid Amin Javed, Deputy Executive Director at Sustainable Development Policy Institute, said Pakistan needed a new IMF programme immediately to manage external financing needs and economic recovery.

“It is encouraging to see that the new government is clear, unlike the past two experiences where engagements with IMF were delayed due to political baggage,” he added.

Aurangzeb aims to bring stability to a country plagued by crippling boom-bust cycles that have led to more than 20 IMF bailout programmes in the past.

Pakistan would be moving towards tapping the Chinese bond market in the next fiscal year, Aurangzeb said in an interview with private channel on Wednesday.

“We should go for an inaugural panda bond in the next fiscal year,” said Aurangzeb, adding that he planned to tap into the good relations Pakistan had with China.

In February, China rolled over a $2 billion loan to Pakistan due in March.

Aurangzeb added that Pakistan should also look towards Middle Eastern banks once it entered a longer term programme with the fund.

The debt-ridden economy, which shrank 0.2% last year and is expected to grow around 2% this year, has been under extreme stress with low reserves, a balance of payment crisis, inflation at 23%, policy interest rates at 22% and record local currency depreciation.

Ahead of the stand-by arrangement, Pakistan had to meet IMF conditions including revising its budget, and raising interest rates and the price of electricity and gas.

The IMF also got Pakistan to raise $1.34 billion in new taxes. The measures fuelled all-time high inflation of 38% year-on-year in May.

Copyright Business Recorder, 2024