Virtual discussions will continue to finalise implementation of policy measures: IMF

• IMF mission chief highlights key priorities needed to address imbalances.
• IMF says timely implementation of policies along with resolute financial support critical for Pakistan.
• Pakistan's failure to implement prior actions leads to delay in signing of staff-level agreement.

ISLAMABAD/WASHINGTON: Pakistan and the International Monetary Fund (IMF) have agreed to continue talks on a bailout deal, delaying the disbursement of $1.1 billion in funding critical to stabilising the dwindling economy.

"Virtual discussions will continue in the coming days," IMF Pakistan Mission Chief Nathan Porter said in a statement, thanking the authorities for the “constructive discussions”.

The statement, issued after the mission concluded its 10-day Pakistan visit, welcomed Prime Minister Shehbaz Sharif’s commitment to implement policies that are required to “safeguard macroeconomic stability”. 

Porter noted that “considerable progress” was made during the talks with Pakistani officials on “policy measures to address domestic and external imbalances”.

The IMF mission chief highlighted that the “key priorities include strengthening the fiscal position with permanent revenue measures and reduction in untargeted subsidies, while scaling up social protection to help the most vulnerable and those affected by the floods; allowing the exchange rate to be market determined to gradually eliminate the foreign exchange shortage; and enhancing energy provision by preventing further accumulation of circular debt and ensuring the viability of the energy sector”.

“The timely and decisive implementation of these policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development,” said Porter.

The IMF mission chief said that the “virtual discussions” will continue between the two sides in the coming days to finalise the “implementation details” of the policies.

Staff-level agreement

Earlier today, The News reported that the failure in the implementation of the prior actions by Pakistan resulted in the delay of the signing of the staff-level agreement (SLA) with the IMF delegation.

It said that the IMF mission had shared a draft Memorandum of Economic and Financial Policies (MEFP) with Pakistan and evolved a broader consensus over actions and prior actions.

The visiting IMF team concluded its review parleys in 10 days and left Islamabad without signing the agreement.

The publication stated that the Pakistani authorities delayed the implementation of prior actions. Secondly, the report said, the IMF remained engaged in securing confirmation from all avenues of external financing.

The prior actions included slapping additional taxes through a mini-budget, taking steps to erase circular debt for the energy sector including hiking electricity and gas tariffs and increasing the policy rate for tightening of monetary stance.

“The IMF shared the draft MEFP and relevant tables with Pakistani authorities and there was a broader consensus on actions/prior actions. Some deviations have occurred during the course of parleys contrary to the original mandate obtained by the IMF staff from Washington (Headquarters). The Fund staff requires permission in order to sign the SLA subsequently in the coming week,” Secretary Finance Hamid Yaqoob late Thursday night told journalists.

The finance secretary said that the government shared its plan to secure external financing from all avenues and the IMF did not raise any objections to the estimates.

Sources told The News said that the Pakistani authorities delayed implementations of prior actions due to which the draft MEFP could not be shared well on time.

It should have been handed over to the Pakistani side three days prior to the conclusion of parleys so that the Ministry of Finance could give a careful reading of the document with full understanding.

If this course had been adopted then the prior actions could have been implemented and shared with the Fiscal Affairs Department (FAD) of the IMF based in Washington. And after getting approval from the IMF headquarters, the staff-level agreement could have been signed at the conclusion of talks on Friday.

The report said that the prevailing uncertainty will continue hovering over the economic horizon of the country due to the delay in the agreement.