KARACHI: Pakistan will be required to give an assurance that its balance of payments deficit is fully financed for the remaining period of an International Monetary Fund (IMF) program, the lender’s resident representative said.
The external financing is one of the last in a string of prior actions the lender wants Islamabad to complete before it clears funding stalled since late last year, Esther Perez Ruiz told Reuters in an emailed response on Monday.
Pakistan hopes to sign a staff level agreement with the IMF after over a month of negotiations to settle policy framework issues aimed at curtailing the fiscal deficit ahead of the annual budget around June.
Pakistan has completed almost all of the prior actions except for the external financing requirement the IMF wanted it to for clearing $1.1 billion in disbursements under the $6.5 billion Extended Fund Facility agreed in 2019. The program ends in June.
“All IMF program reviews require firm and credible assurances that there is sufficient financing to ensure that the borrowing member’s balance of payments is fully financed ... over the remainder of the program. Pakistan is no exception,” IMF’s Ruiz said.
Finance Minister Ishaq Dar said last week that the external financing assurance was not one of the IMF’s conditions for clearance of the funding.
He said Pakistan needed $5 billion external financing for the balance of payments deficit in the fiscal year ending June 30, adding the IMF believed it should be $7 billion.
The IMF representative also said that Pakistan was committed to align its official and informal foreign exchange market rates, days after the cash-strapped country’s currency plunged dramatically.
A permanent power surcharge on consumers was also among measures planned by Pakistani authorities to address energy sector debt, she said.
