Ajit Karn
The objective of the IMF talks is to release at least $1.1 billion in stalled funding as part of a $6.5 billion bailout agreement signed in 2019 for the nuclear-armed nation.
Pakistan and the International Monetary Fund will resume online talks the following week, it was announced on Friday, after ten days of face-to-face discussions on how to keep the country afloat in Islamabad ended without an agreement.
The objective of the IMF talks is to release at least $1.1 billion in stalled funding as part of a $6.5 billion bailout agreement signed in 2019 for the nuclear-armed nation.
Finance Minister Ishaq Dar informed reporters that Pakistan and the IMF had reached an agreement on the conditions for releasing the funds, which had been delayed since December of last year.
He added that negotiations would resume virtually on Monday, citing “routine procedures” for the delay. Dar stated, “We will implement whatever was agreed upon between our teams.”
In a statement, Pakistan IMF Mission Chief Nathan Porter confirmed that negotiations were ongoing and that substantial progress had been made. However, the hold-up caused the price of the nation’s government bonds to plummet once more.
Pakistan is in desperate need of a favourable outcome. The $350 billion economy is still reeling from last year’s devastating floods, which the government estimates will cost $16 billion to rebuild.
The heavily indebted nation has insufficient foreign reserves to cover vital imports for more than three weeks. The longer it takes for the IMF tranche to be paid out, analysts say, the greater the risk of default, especially with upcoming elections.
Premier Shahbaz Sharif described Pakistan’s economic situation as “unimaginable” last week.
Khaqan Najeeb, a former finance ministry adviser, told Reuters that Pakistan should have reached a staff level agreement at the conclusion of the IMF mission.
“Delay is inadmissible.”
IMF MEASURES
Prior to the disbursement of funds, the so-called staff-level agreement, which must be approved by the IMF’s headquarters in Washington, must be reached.
In addition to the stalled tranche, another $1.4 billion remains of the June-terminating $6.5 billion bailout programme.
According to experts, Pakistan requires the payment as soon as possible. Murtaza Syed, a former central bank deputy governor, told Reuters, “if this goes on for more than a month, things will become more difficult because our foreign exchange reserves are at a critical level.”
The IMF’s conditions include a return to a market-based exchange rate and higher fuel prices, measures that Pakistan recently implemented and which have already pushed inflation to an all-time high of 27.5% year-over-year in January and caused shortages of some imported goods.
Dar stated that Pakistan had also agreed with the IMF to implement fiscal measures, such as the imposition of new taxes.
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Analysts are concerned that additional fiscal austerity could worsen the economic crisis.
Sakib Sherani, who served as the finance ministry’s chief economic adviser in 2009-2010, stated, “The government has not only wasted over five months in realising the gravity of the situation, but it is still sleepwalking the nation into an economic abyss.”
