By Staff Reporter
ISLAMABAD: Pakistan’s economic whiz kids today opened talks with their International Monetary Fund (IMF) counterparts on a stalled bailout facility with their fingers crossed as their forerunners left no room for error for them.
The make-or-break talks to breathe new life in an almost dead loan programme have commenced in Doha, Qatar.
The IMF is not going to cut any slack to Pakistan this time and will get done what needs to be done. It will ask the government to open its policy toolbox and make its fiscal and monetary policies more stringent and slap new taxes in the upcoming budget to generate revenues.
For a whole week, the Pakistani side will move heaven and earth to strike a staff-level agreement with the IMF to pave the way for the release of a $1 billion tranche under the Extended Fund Facility (EFF) programme. Pakistan needs these dollars desperately as its import cover is currently dangerously low and inching towards a major commodity shortage crisis.
Success of these parleys is manifestly going to hand the battered South Asian economy most probably its very last lifeline to avoid getting sucked down into a vortex of balance of payment crisis and becoming another Sri Lanka or worse.
These talks mark Pakistan’s fresh attempts to strike a staff level agreement to pass the fund’s 7th review for reanimating a lifeless $6 billion EFF programme.
These are not going to be a laid-back small talk about the weather in The Arabian Peninsula. This will be an excessively challenging mental obstacle course. It is seen as a brutal test of financial nerves and economic wits for Pakistan’s team.
Some even saying how can a group of plump sheep entering a lion’s territory scouting for green pastures expect there will be no bloodshed before they finally reach it.
State Bank of Pakistan’s currency reserves saw $6 billion going poof in the last two months, depleting to $10.3 billion, which is around 45 day’s import cover.
Pakistan’s delegation led by Federal Secretary Finance Hamid Yaqoob left for Doha from Islamabad last night for holding talks with the IMF review mission.
IMF suspended these talks in March 2022 after the PTI-led regime, in a breach of the agreement with the multilateral lender, introduced a relief package for inflation-broken consumers to prop up its falling popularity.
Under the package petroleum prices were reduced and then frozen at those levels for until the next fiscal budget. The power tariff was also slashed down for certain consumers.
As a result Pakistan failed the 7th IMF review under EFF (Extended Funded Facility) arrangement.
Following former prime minister Imran Khan’s in-house ouster via a no-trust motion, Shehbaz Sharif became the 23rd Prime Minister of Pakistan.
Amid a simmering political unrest that continues to plague the country the EFF was suspended.
IMF, in its most recent forecasts, revised the country’s current account deficit upwards to 5.3 percent of the GDP and inflation to 12.7 percent in FY2022, strengthening the case for more inflows to save the country from defaulting.
Within days Miftah Ismail was installed in the Finance Minister’s office, while Dr Aisha Ghous Pasha was given the portfolio of Minister of State for Finance and Revenue.
Wasting no time, Ismail and Pasha landed in Washington to attend multilateral lenders’ annual spring meetings. On the sidelines they met with the IMF mission and urged them to jack up EFF funding from $6 to $8 billion and also increase the timeframe of the EFF programme from September 2022 to June 2023.
Moved by Pakistani official’s pleadings, the IMF agreed to dispatch its review mission in the second half of May 2022.
The IMF in its statement after meeting with Pakistani ministers said: “We had very productive meetings with the Finance Minister of Pakistan Miftah Ismail over Pakistan’s economic developments and policies under the EFF programme”. “We agreed that prompt action is needed to reverse the unfunded subsidies which have slowed discussions for the 7th review.”
It further said based on the constructive discussions with the authorities in Washington, the IMF expected to field a mission to Pakistan in May to resume discussions over policies for completing the 7th EFF review.
“The [Pakistani) authorities have also requested the IMF to extend the EFF arrangement through June 2023 as a signal of their commitment to address existing challenges and achieve the programme objectives,” the IMF added.
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