By Staff Reporter
ISLAMABAD: The International Monetary Fund (IMF) is set to conduct its final review of Pakistan’s $3 billion stand-by arrangement (SBA) starting today, with discussions anticipated on a new, longer-term bailout for the South Asian nation, the finance ministry and IMF said.
The talks, pivotal for the disbursement of the final tranche of funding, are expected to span from March 14th to 18th, with potential extensions until March 21st or 22nd.
The review could lead to the release of a final tranche of approximately $1.1 billion, part of a rescue package from last summer that helped Pakistan avoid a sovereign debt default.
Finance Minister Muhammad Aurangzeb spearheads the Pakistani economic team’s engagement with the IMF, focusing on meeting all structural benchmarks and performance criteria for the review’s success.
“Pakistan has met all structural benchmarks, qualitative performance criteria, and indicative targets for the successful completion of the IMF review,” the finance ministry said in a statement.
“This would be the final review of SBA, and staff-level agreement is expected after this appraisal. Once staff-level agreement is reached, the final tranche of $ 1.1 billion will be disbursed, following the approval of the Executive Board of the IMF.”
The IMF’s Executive Board’s approval is required for the disbursement of the final tranche. “The mission will focus on completing Pakistan’s current SBA-supported program, which ends in April 2024,” an IMF spokesperson said.
Pakistan is also seeking a new loan of at least $6 billion from the IMF to help the new government cope with a looming debt crisis.
Prime Minister Shehbaz Sharif has directed his finance team to begin preparations for an Extended Fund Facility (EFF) following the SBA’s expiration on April 11.
Aurangzeb informed reporters that Pakistan would use the IMF review to argue for a larger, long-term program.
The government has not disclosed the size of the additional funding it seeks through a successor program. However, during the upcoming talks, Pakistan will express keen interest in discussing another EFF, with further discussions expected at the IMF and World Bank’s spring meetings in April in Washington.
The global lender has said it will formulate a medium-term programme if Islamabad applies for one.
Pakistan is facing a severe economic challenge, as it has to repay $25 billion of external debt in the fiscal year starting in July, about three times its foreign-exchange reserves. The country also has a large fiscal deficit, a chronic trade imbalance and a weakening currency.
The IMF’s new loan would help Pakistan avoid a default on its debt obligations and ease the pressure on its balance of payments. But it would also come with stringent conditions, such as raising taxes, cutting subsidies, reforming the energy sector, and allowing the currency to float freely.
The debt-ridden economy, which contracted by 0.2% last year and is expected to grow around 2 percent this year, faces challenges including low reserves, a balance of payment crisis, and runaway inflation.
Pakistan has a long and troubled history with the IMF, having received 23 bailout packages since its independence in 1947, more than any other country. Critics say the IMF’s policies have often worsened Pakistan’s economic woes.
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