By Staff Reporter
ISLAMABAD: The International Monetary Fund (IMF) is collaborating with Pakistani authorities to complete the ninth review of a stalled bailout program, the Fund’s mission said on Friday.
Nathan Porter, the mission chief, said the IMF remains committed to working with Pakistani officials to conclude the ninth review once the necessary funding is in place and the agreement is finalized.
“IMF supports the authorities in the implementation of policies in the period ahead, including in the technical work to prepare the FY24 budget, which is to be passed by the National Assembly before end-June,” Porter said.
A day earlier Reuters newswire reported that IMF will review Pakistan’s budget plans for the upcoming financial year, a process that could pave the way for the approval of the pending tranche.
“The budget review is a necessary step before the lender can approve the release of pending bailout funds that are critical to resolving Pakistan’s acute balance of payments crisis,” it reported.
The release of a staff-level agreement to release $1.1 billion has been delayed since November.
Pakistani authorities have expressed frustration over the IMF’s new sets of demands before signing the Staff Level Agreement (SLA), which they now claim was not asked in the past.
The agreement’s execution has been on hold, although the Kingdom of Saudi Arabia and the United Arab Emirates have confirmed their commitment to providing external financing to Pakistan, a key step for the release of the tranche.
The IMF had been seeking confirmation of an external financing gap of $5 billion by the end of June 2023. The KSA has extended confirmation of $2 billion, while the UAE has confirmed $1 billion.
The remaining $2 billion of external financing is expected to come from the World Bank, which is expected to provide $450 million under the RISE program, and the Asian Infrastructure Investment Bank, which will co-finance $250 million. The remaining $1.3 billion is expected to be secured from commercial banks once the SLA between Pakistan and the IMF is signed.
The program, which was designed to help Pakistan address its balance of payments issues and implement structural reforms, has faced repeated delays and setbacks and the delay has exacerbated Pakistan’s economic problems.
With the program’s expiry deadline fast approaching, Pakistan’s options for reviving it are becoming increasingly limited.
The country faces a total of $3.7 billion of debt payments starting the current month, according to the Fitch Ratings. About $700 million of maturities are due in May and another $3 billion in June.
“Our base case is still that Pakistan and the IMF will reach an agreement on the program review.”
However, the agency warned that the risks are large and the rating cut in February reflected that a default or debt restructuring is an increasingly real possibility for Pakistan.
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