World News | IMF Team to Visit Pak Next Week to Hold Review Talks

Islamabad, Oct 25 (PTI) The IMF will send its team to Pakistan next week to hold talks for the release of USD 710 million second tranche of a USD 3 billion loan to the cash-strapped country to stabilise its debt-ridden economy, media reports said on Wednesday.

A clarity on next general elections date can further strengthen the hands of the Ministry of Finance during the upcoming review talks for the July-September period of this fiscal year, although the International Monetary Fund (IMF) has not explicitly attached any such condition.

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"The IMF team led by Nathan Porter will field a mission to Pakistan starting on November 2 on the first review under the current Stand-By Arrangement (SBA) of USD 3 billion," Esther Perez, the resident representative of the IMF, was quoted as saying by the Express Tribune newspaper.

The IMF had proposed November 7 in anticipation of a delay in compiling the first quarter data but the Ministry of Finance assured that all the relevant data was available for the review talks, according to sources.

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The first review talks will be held for the second loan tranche of USD 710 million and a staff-level agreement would pave the way for its approval by the IMF board in December.

While approving the USD 3 billion loan in July this year, the Washington-based global lender had also released the first tranche of USD 1.2 billion. Although essentially a bridge loan, it offered much respite to Pakistan, which was battling an acute balance of payments crisis and falling foreign exchange reserves.

Pakistan's economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation.

The federal government and the State Bank of Pakistan remain hopeful that they would comfortably complete the review on the back of meeting the conditions agreed with the IMF in July.

However, the external financing gap remains a hard area for the government, as the Ministry of Finance's internal assessment shows a wide gap between the loans planned to be received and the actual disbursements during the current fiscal year.

Only on account of Eurobonds and the foreign commercial loans, the government has recently estimated a shortfall of USD 4.5 billion. The hole is even bigger than this while taking into account shortfall against some other projected disbursements.

The exchange rate management and the monetary policy stance are the other two areas that would be minutely reviewed by the IMF, a senior government functionary said on Tuesday.

After showing a constant downward trajectory for over a month, the dollar has again started strengthening against the rupee during the past couple of days. The rupee depreciation is seen as a prelude to the IMF talks.

The rupee has appreciated by 8% in the interbank market and by 14% in the open market during the past over one month due to a military-pushed crackdown against the hoarders and smugglers and management of imports.

The sources said that the international financial institutions are eager to have clarity on the political horizon. Under the Constitution, the elections have to be held by November 9 but the Election Commission of Pakistan has indicated the end of January 2024 as a tentative period for the elections.

Highly placed sources told the paper that during the recently held IMF-World Bank annual meetings, the Pakistani delegation faced three major questions in almost every meeting.

The finance ministry officials were asked about the status and role of the Special Investment Facilitation Council, the prospects of next elections, and the mandate of the interim government, the sources said.

Unlike the last failed USD 6.5 billion programme, the Ministry of Finance seemed committed to meeting the conditions set for the USD 3 billion programme during the past three months. At many occasions, the finance secretary appeared receptive to the IMF queries and ensured transparency.

This was contrary to the past practice when the Ministry of Finance appeared dragging feet on the USD 6.5 billion deal that eventually collapsed. The USD 6.5 billion Extended Fund Facility could not be completed and the programme expired on June 30 with USD 2.6 billion undisbursed.

IMF Director of Strategic Communications Julie Kozack had said in July that “steadfast implementation” of the nine-month SBA was “critical to Pakistan's future”.

SBP Governor Jameel Ahmad said this month that the central bank was “comfortably placed” in terms of meeting end-September IMF targets. He had said that SBP's forward foreign exchange liabilities had declined and the forward book target of USD 4.2 billion for end-September 2023 agreed with the IMF was met by a wide margin.

Similarly, the SBP is also very comfortably placed to meet the other end-September IMF targets of a negative USD 14.5 billion Net International Reserves (NIR) and Net Domestic Assets (NDA) of Rs15 trillion, according to the central bank governor.

A cabinet minister dealing with one of the economic ministries said on Tuesday that the Power Division comfortably met the IMF's condition about the circular debt reduction plan.

Meanwhile, Pakistan's finance secretary has convened an important meeting of all ministries, divisions, and departments on Thursday to get an update on all structural benchmarks, indicative criteria and performance criteria agreed with the IMF for the end of September 2023, according to the Geo News.

Pakistan's shaken economy has compelled it to approach several nations seeking fiscal help in the form of loans.

On Wednesday ahead of the IMF talks, Pakistan asked Saudi Arabia to provide a USD 1 billion oil facility on deferred payment for the calendar year 2024, The News International reported.

"Pakistan has made a formal request for USD 1 billion Saudi Oil Facility on deferred payment with effect from January 2024. Saudi Arabia has not yet given its confirmation, and its exact modalities will be worked out within the next couple of months, including attached cost and other terms and conditions,” a source was quoted as saying by the paper.

The facility is part of the financing plan agreed upon and worked out with the IMF by Pakistani authorities as part of the USD 3 billion Standby SBA. The existing facility will expire in December of this year.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)