IMF sees progress in Pakistan review, climate loan talks

• Staff-level agreement remains unresolved despite progress.
• Frequent policy shifts hinder IMF negotiations.
• IMF praises programme implementation and fiscal reforms.
  

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have yet to finalise a staff-level agreement, though IMF officials acknowledged substantial progress in negotiations under the 37-month Extended Fund Facility (EFF), The News reported.

While Pakistani authorities expressed optimism about reaching a broader agreement, frequent shifts in policy decisions created hurdles, ultimately preventing the conclusion of the staff-level agreement at this stage.

“As the statement from the IMF reads, programme implementation has been strong. We have made good progress in our discussions while the Mission was here and will continue with result-oriented consultations in the coming weeks,” said Minister for Finance Mohammad Aurangzeb in a brief reply when asked about the reasons behind the inability to reach a staff-level agreement with the IMF on Saturday.

The frequent shifting of goalposts created differences in reaching a consensus. At one point, when consensus seemed achievable, it was claimed that the political leadership might not accept the harsh conditions. Ultimately, the IMF chose to return to Washington, DC, without finalising a staff-level agreement.

The primary reasons for the impasse included the inability of authorities to achieve a primary surplus of Rs2.4 trillion for the current fiscal year, persistent losses in the power sector, unresolved issues related to state-owned enterprises (SOEs), delays in privatisation deadlines, and challenges in curtailing expenditures. As a result, the IMF announced the continuation of discussions.

Sources revealed that an agreement was reached with the IMF to increase the number of Point of Sale (POS) machines by installing several thousand more within the current fiscal year. Additionally, it was agreed to implement video surveillance of manufactured goods, though the main objectives of this measure were not fully clarified. 

Another top negotiator told The News that significant progress had been made in discussions, but finalising a staff-level agreement is a time-consuming process.

In a statement titled “Pakistan: End-of-Mission Statement on the First Review for the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and on discussions for an Arrangement under the Resilience and Sustainability Facility (RSF),” the Washington-based global lender stated that an IMF team, led by Nathan Porter, visited Islamabad and Karachi from February 24 to March 14, 2025, to hold discussions on the first review of Pakistan’s economic programme supported by the EFF and on a possible new arrangement under the IMF’s Resilience and Sustainability Facility (RSF).

At the conclusion of discussions, Porter issued a statement, saying: “The IMF and the Pakistani authorities made significant progress toward reaching a Staff Level Agreement (SLA) on the first review under the 37-month Extended Arrangement under the Extended Fund Facility (EFF). 

“Programme implementation has been strong, and the discussions have made considerable progress in several areas, including the planned fiscal consolidation to durably reduce public debt, maintenance of sufficiently tight monetary policy to maintain low inflation, acceleration of cost-reducing reforms to improve energy sector viability, and implementation of Pakistan’s structural reform agenda to accelerate growth, while strengthening social protection and rebuilding health and education spending. 

“Progress has also been made in discussions on the authorities’ climate reform agenda, which aims to reduce vulnerabilities from natural disaster-related risks, and accompanying reforms which could be supported under a possible arrangement under the Resilience and Sustainability Facility (RSF). 

“The mission and the authorities will continue policy discussions virtually to finalise these discussions over the coming days.

“The IMF team is grateful to the Pakistani authorities, private sector and development partners for fruitful discussions and their hospitality throughout this mission.”