IMF missions due in Islamabad for climate finance, EFF review

• Pakistan eyeing $2-2.5bn via augmenting of EFF via RSF.
• Govt prepares report under IMF conditions to qualify for it.
  
• Report features factors on selection of PSDP schemes.
  

ISLAMABAD: The International Monetary Fund (IMF) has confirmed that two of its missions will visit Pakistan in the next two weeks; the first mission will focus on discussions regarding climate finance, while the second will carry out the first review of Pakistan’s progress under the $7 billion Extended Fund Facility (EFF), The News reported on Saturday.

"An IMF staff team is scheduled to visit Pakistan in early-to-mid March for discussions around the first review under Pakistan's Extended Fund Facility-supported programme, and the authorities’ request for assistance under a Resilience and Sustainability Facility (RSF) arrangement," the IMF's resident chief Mahir Binici stated in a brief statement.

The official further added that a technical team will be in Pakistan starting in late February to discuss technical issues related to a possible RSF arrangement.

The confirmation comes days after the publication reported that an IMF review mission was due in Pakistan in the first week of March.

Prime Minister Shehbaz Sharif-led government secured the approval of IMF's Executive Board for the fresh loan programme in September 2024 which was followed by the disbursement of a $1.02 billion tranche.

With IMF officials in Pakistan, Islamabad will also have to evolve a broader consensus on the major contours of the next budget for 2025-26 with the lender's staff.

If both sides fail to reach a consensus, the completion of the first review might be linked to the parliament's approval of the budget.

As agreed, the first review and approval of a $1 billion tranche by the Executive Board of IMF is scheduled to be done by April 2025.

However, official sources told The News in background discussions that first of all a technical team of the IMF would arrive in Islamabad on coming Monday (February 24) for holding talks under the RSF under which Pakistan had made a request for $1 to $1.5 billion funding to augment the existing loan of $7 billion under EFF up to $8 or $8.5 billion.

The findings of this technical mission will then firm up on the occasion of the first review under the EFF arrangement as the IMF review mission is scheduled to visit Islamabad by early next month probably from March 4, 2025, for discussing various sectors of the economy for almost 10 to 12 days period after which the Fund staff would take at least four to six weeks period for presenting its report before the IMF's executive board, provided both sides struck a staff-level agreement in the upcoming review talks.

In the case of smooth sailing in both technical and review missions, Pakistan would be able to secure $2 to $2.5 billion through the release of a second instalment of $1 billion and augmenting of EFF through an RSF loan facility of $1 to $1.5 billion.

In order to qualify for RSF, Pakistan has prepared a Public Investment Procedures and Parameters report under the IMF conditions and its major contours will be discussed during the upcoming parleys with the technical team of the IMF next week. The federal government has also agreed with the IMF that no provincial nature project will be financed from the federal development allocation in the PSDP.

This report incorporated 10 factors on the basis of which the next Public Sector Development Program (PSDP) schemes is going to be selected including (i) Strategic and core ongoing projects, (ii) Projects with 80% plus expenditure with realistic completion estimate, (iii) Exceptional and high scoring infrastructure projects (iv) Pre-scrutinised DDWP approved projects against given criteria, (v) Foreign-funded projects with adequate rupee cover allocation within IBC, (vi) Provincial nature projects in 20 least developed districts, (vii) Projects in newly-merged districts (NMDs) and other areas to ensure equitable regional development, (viii) PPP projects, where PSDP funding is either used as equity or as viability gap, (ix) Climate responsive and resilient projects, (x) Ready for investment projects.

It has also been decided with assent of the National Economic Council (NEC) that only 10% of new projects will be included in the PSDP list from the next budget for 2025-26.

Talking to this scribe, Minister for Planning Ahsan Iqbal said that the share of provincial nature projects in the PSDP went up from 14% in 2018 to over 42% till 2022, leaving no fiscal space for undertaking important national-level development projects through the PSDP.

He alleged that the development framework was destroyed during the PTI-led regime and now the government was binding itself to include only 10% of new projects in the PSDP list.

All resources will be diverted towards the completion of ongoing projects, he said and added that the throw-forward would be slashed down in coming years.