KARACHI: The International Monetary Fund (IMF) is preparing to discuss Pakistan’s financial year 2024 budget plans, as part of the lender’s support programme to the cash-strapped nation, which the country’s parliament would need to pass by June, the IMF’s Pakistan mission chief told Reuters on Thursday.
Negotiations over key budget targets such as the fiscal deficit are one of the last hurdles before the IMF approves a staff-level agreement (SLA) to release $1.1 billion in funding, which has been delayed for months, and crucial for Pakistan to resolve an acute balance of payments crisis.
The finance ministry did not immediately respond to Reuters request for a comment.
Last week, Finance Minister Mohammad Ishaq Dar had reiterated that Pakistan has already complied with all the prior actions for the 9th review with the IMF.
A successful SLA for the 9th review, pending since November, will unlock the $1.1 billion tranche. The funding is a part of a $6.5 billion bailout package the IMF approved in 2019, which is due to end in June, prior to the budget.
“In all IMF programmes, the authorities issue a letter of intent associated with the last review outlining their policy intentions for the period after the program,” said Nathan Porter, mission chief to Pakistan.
The bailout is crucial for the South Asian economy, which has been faced with a barrage of woes with a perceived default risk and a downgrade by international rating agencies reflecting the state of the economy that has also had to bear major political turmoil and frequent change in key leadership.
Dar, US diplomat discuss Pakistan’s IMF programme
The country is also dealing with low foreign exchange reserves. Foreign exchange reserves held by the State Bank of Pakistan (SBP) are currently at $4.46 billion, barely enough for a month of essential imports.
Last month, the IMF mission chief said the lender is looking forward to obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the 9th Extended Fund Facility (EFF) review, a statement that came after Pakistan secured $3 billion in fresh inflow from Saudi Arabia and the UAE.
“We welcome the recent announcement of important financial support to Pakistan from key bilateral partners,” Nathan Porter, IMF Mission Chief to Pakistan, was quoted as saying in a statement to Business Recorder.
“During the meetings between the Pakistani delegation and IMF staff and management, there was agreement on the need to maintain strong policies and secure sufficient financing to support the authorities’ implementation efforts.
“The IMF is supporting these efforts and looks forward to obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the 9th EFF review,” Porter said back then.
Pakistan was required to give an assurance that its balance of payments deficit is fully financed for the remaining period of the IMF programme.
Pakistan’s economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels, while devastating floods and a major shortage of energy have piled on further pressures.
At the same time, a SLA with the IMF has remained elusive even after domestic taxation measures and a free-floating exchange rate.