Ahead of IMF meeting, PM, FinMin discuss economic challenges facing Pakistan

Ahead of his upcoming visit to the United States (US), Finance Minister Muhammad Aurangzeb briefed Prime Minister Shehbaz Sharif on Friday about his scheduled meetings with the officials of the International Monetary Fund (IMF), World Bank (WB), and other institutions.

According to a statement issued by the Prime Minister’s Office, matters related to the overall economic situation of the country were discussed in the meeting.

A day earlier, IMF chief Kristalina Georgieva confirmed that Pakistan was in discussions with the fund on a potential follow-up programme to its nine-month, $3 billion Stand-By Arrangement (SBA), adding that it had important issues to solve.

Georgieva told an event at the Atlantic Council think tank, that Pakistan was successfully completing its existing programme with the IMF and its economy was performing somewhat better, with reserves now being built up.

"There is a commitment to continue on this path, and the country is turning to the fund for potentially having a follow-up programme," Georgieva said, flagging issues that the struggling South Asian nation still needed to address.

"There are very important issues to be solved in Pakistan: the tax base, how the richer part of society contributes to the economy, the way public spending is being directed and of course, creating ... a more transparent environment."

Pakistan and the IMF last month reached a staff-level agreement on the second and last review of the $3 billion SBA, which, if cleared by the global lender's board, will release about $1.1 billion to the struggling South Asian nation.

The IMF's executive board is expected to review the case in late April, but no date has been set yet, a spokesperson said.

Both sides have also spoken about negotiating a longer-term bailout and continuing with necessary policy reforms to shrink the deficits, build up reserves, and manage soaring debt servicing.

The News reported on Tuesday that Pakistan had decided to formally approach the IMF for the medium-term Extended Fund Facility (EFF) during the upcoming annual spring meetings of the Bretton Wood Institutions (BWIs).

The size and duration of the upcoming bailout package will be worked out by the IMF’s review mission expected to hold talks, probably from the first week of May 2024 to finalise major contours of the bailout package.

“We are all set to make a formal request to IMF during the upcoming annual spring meetings of BWIs known as the IMF and World Bank from April 15 to 20, 2024 in Washington DC as Pakistan’s delegation led by minister for finance will attend it,” top official sources confirmed.

The sources said Pakistan decided to make a request for augmenting the EFF through climate finance, so there was a possibility for securing $6 to $8 billion SBA.

“We are going to present our argument before the IMF management that Pakistan faced severe consequences of climate degradation and deserved support from the international community and donor agencies,” said the sources. Islamabad will make a request for the EFF with the possibility of augmenting through climate finance.