Pakistan, IMF fail to reach common ground on $1.1 billion bailout loan

The $6 billion bailout package has been repeatedly stalled after former Pakistan prime pinister Imran Khan-led government reneged on subsidy agreements and failed on its tax collection commitments out

The deadlock persists between Pakistan and International Monetary Fund as the two sides have failed to reach the staff-level agreement to unlock the USD 1.1 billion loan tranche after 10 days of "tough" talks, The News International reported.

The development comes as negotiations, which took place between IMF and Pakistan from January 31 to February 9, concluded in Islamabad. The IMF's mission had arrived in Islamabad to hold talks with Pakistani authorities.

Pakistan Finance Minister Ishaq Dar was due to hold a press conference for the resumption of the programme. However, he has not made an official announcement regarding the matter.

In a statement released late Thursday night, Pakistan's Secretary of Finance Hamed Sheikh, without revealing details said that "an agreement has already been struck with the IMF on prerequisite measures," as per The News International report.

"The negotiations with the IMF have been completed. The IMF has handed over the MEFP [Memorandum of Economic and Financial Policies] document [to Pakistan]," he further said as per The News International.

Hamed Sheikh announced that the international creditor has told Pakistani authorities of striking a staff-level pact in the coming days and the "agreement for releasing the loan will also be signed soon," as per the news report.

Sheikh said, "All matters between the IMF and Pakistan have been agreed upon," noting that the IMF has also analysed sources of foreign inflows. He further said that the IMF mission, headed by Nathan Porter, will release a detailed statement later after approval from Washington.

 

During the policy-level talks, the IMF expressed its reservations over the projections made by Pakistan's Ministry of Finance over external financing inflows from multilateral, bilateral creditors and commercial loans, according to The News International report. The IMF's loan is critical for Pakistan's economy as the State Bank of Pakistan (SBP)-held foreign exchange reserves have dropped to USD 2.91 billion.

The USD 6 billion bailout package has been repeatedly stalled after former Pakistan Prime Minister Imran Khan-led government reneged on subsidy agreements and failed on its tax collection commitments outlined in the deal. Pakistan PM Shehbaz Sharif-led government resumed the programme and received around USD 1.17 billion in August.

Later, the programme stalled again in September at the time of the ninth review as the Pakistani authorities failed to live up to its commitments with the IMF and initiated some fiscal measures in contravention of the conditions agreed, as per the news report. Later, the Pakistan government agreed to IMF's conditions as the foreign exchange reserves continued to reduce to dangerously low levels.

Pakistan’s Economic Co-ordination Committee on Friday approved a plan it is negotiating with the IMF to slash its circular debt, a form of public debt that builds up in the power sector due to subsidies and unpaid bills.

The committee, led by Finance Minister Ishaq Dar, also approved an additional surcharge of Rs 1 per unit of electricity for FY 2023-24 to recover an estimated 76 billion Pakistani rupees ($282.81 million) in power sector liabilities.
                                                                                                                                                                                                                                                                                                                                                - Reuters