IMF 'reviewing' developments in Pakistan

• IMF hopes a peaceful way to resolve current dilemma will be found.
• Fund rebuts reports of asking Pakistan to arrange $8 billion.
• Ministry of Finance will share budget paper with cabinet today.

ISLAMABAD: International Monetary Fund (IMF) Resident Chief in Pakistan Esther Perez Ruiz has said that the lender was reviewing the recent developments in Pakistan, hoping that a peaceful way to resolve the current dilemma will be found, The News reported on Monday.

The remarks were made in response to a question of whether keeping in view the recent political developments, was there any possibility of striking the staff-level agreement within the ongoing month, or next budget talks would commence without the conclusion of the ninth review.

Esther further said: “We take note of recent developments, and while we do not comment on domestic politics, we do hope that a peaceful way forward is found.”

On the economic issues, the IMF’s resident chief stated that staying within the policy framework agreed upon for the review and sufficient financing from partners to support the authorities’ implementation efforts remain key to regaining macroeconomic stability.

Esther added that the February mini-budget, the adjustment of energy prices, and the measures aimed at easing import restrictions and a market-determined exchange rate, are important steps to stabilise the economy while supporting the most vulnerable.

“The IMF welcomes the announcement of important financial support to Pakistan from key external partners and looks forward to obtaining the ‘remaining necessary financing’ assurances,” she added.

The resident also rebutted reports that the IMF was asking Pakistan to raise $8 billion in fresh financing.

"The IMF will continue to support Pakistan in the best possible way to secure sufficient financing from partners.

“The amount of financing necessary to support the authorities’ implementation efforts and ensure that Pakistan stays current on external payments has remained unchanged throughout discussions under the ninth review,” she concluded.

As IMF is reluctant to strike a staff-level agreement without seeking confirmation on the external financing gap, Pakistan, meanwhile, conveyed to the Fund staff to conclude the ninth review otherwise budgetary framework for 2023-24 would not be shared.

The lingering differences between the IMF and Pakistan are heading towards an “unbreakable deadlock” whereby Pakistani authorities claim that the confirmation of $4 billion financing was shared with the IMF even with its full details and break-up but the Fund was playing “politics” by not moving towards striking an agreement despite passing six months period. 

The ninth review was due in November 2022 but the two sides have not yet reached consensus.

The patience of Pakistani high-ups is running out as they argue before the IMF officials that Islamabad should be treated as a member of the Fund, not a beggar.

The Pakistani authorities argued that the current account deficit was projected at $8 billion for the current fiscal year during talks held from January 31 to February 9, so the financing gap was worked out at $7 billion for the current financial year ending on June 30.

However, Pakistani authorities took the stance that the current account deficit would be brought down in the range of $4 to $5 billion, so the financing gap should also be minimised. 

After two months of talks, the IMF brought down the financing gap up to $6 billion keeping in view declining deficit levels. Now the current account deficit turned into a surplus of $640 million for March 2023 and overall it stood at a deficit of $3.4 billion for the first nine months of the current fiscal year. 

The Pakistani authorities are hopeful that the current account deficit would remain surplus for April 2023 when the numbers would come out in the next few days.

The financing gap of $4 billion was fulfilled by getting confirmation as the Kingdom of Saudi Arabia conveyed to the IMF that they were ready to provide an additional $2 billion in deposits and UAE $1 billion. 

The World Bank is committed to providing $450 million RISE-II after fulfillment of four prior conditions and $250 million by the AIIB. Pakistan also received firm commitments for getting $350 million out of total Geneva pledges for flood-affected areas. 

The only remaining amount is $1 billion from commercial banks and they are waiting for IMF's deal.

The Pakistani officials argue that the external financing requirements had been fulfilled, so there was no justification for using delaying tactics to avoid signing the agreement.

Keeping in view this situation, the Ministry of Finance is all set to share the Budget Strategy Paper (BSP) with the federal cabinet without sharing it with the IMF in its meeting scheduled to be held today (Monday).