KARACHI: The International Monetary Fund (IMF) and Pakistan are ready to resume stalled negotiations for the completion of the seventh review of a $6 billion loan program on Monday after initial contacts between Prime minister Shehbaz Sharif’s aide on finance and representatives of the international lending agency, officials said.
The two sides have been negotiating for the completion of the seventh review under the IMF’s Extended Fund Facility (EFF). However, their conversation stalled after the fund expressed its concern over a relief package amounting to $1.7 billion which was announced by the previous administration and included freezing of petroleum prices and cuts in electricity tariffs in response to rising inflation in the country.
The IMF said on Sunday its officials had met Miftah Ismail, who is expected to become Pakistan’s new finance minister, as part of its engagement with the country.
“As part of our continued engagement with Pakistan, the IMF Resident Representative met last Friday with the Finance Minister-designate Mr. Ismael, ahead of the visit of Pakistan’s delegation to Washington D.C. during the Spring Meetings,” Esther Perez Ruiz, the fund’s top official in Pakistan, told Arab News in a written response to a query on Sunday.
An official of the finance ministry, who declined to be named, said a Pakistani delegation were ready to resume talks with the fund officials in Washington.
Secured in 2019 to stave off balance of payment crisis, Pakistan has so far received about $3 billion from the fund under the $6 billion loan facility. The country expects to get another $1 billion after the successful completion of the seventh review under the program.
Pakistan has faced significant pressure on its foreign exchange reserves in recent months amid elevated global commodity prices and a recovery in domestic demand. The Russia-Ukraine military conflict, which has driven up global commodity prices, has also amplified pressure on its external position.
However, the IMF has expressed its resolve to support Pakistan on policies and reforms amid these challenges.
“The IMF looks forward to continuing supporting the Pakistani authorities on economic policies and reforms to ensure macroeconomic stability in Pakistan amidst the current challenging global economic environment,” Ruiz added.
According to the finance ministry, Pakistan achieved the targets agreed toward the end of December while progress on other actions mentioned in the Memorandum on Economic and Financial Policies (MEFP) for the 6th review were also found to be satisfactory during the initial talks with the IMF prior to the change of government in the country.
After the completion of technical talks, the MEFP text for the seventh review will come under discussion.
The IMF program is critical for Pakistan at a time when the country’s foreign exchange reserves have declined to about $10 billion and fiscal deficit is expected to hit a historic level.
The country’s current account deficit amounted to more than $12 billion between July 2021 and February 2022 in a stark contrast with the surplus of $1 billion during the corresponding period a year before.
Under the circumstances, Pakistan is expected to witness a widening of current account deficit to about five to six percent of its GDP.
Pakistani analysts believe the deviation from program objectives by the previous administration that introduced energy rate cuts and freezing of petroleum prices may cause a delay the IMF program completion.
The IMF facility was originally planned to finish after the ninth review which was scheduled for September 2, 2022.