The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan on the final review of a $3 billion bailout, where the country will receive $1.1 billion after approval from the Fund’s Executive Board, the lender said on Wednesday.
“The agreement recognises the strong program implementation by the State Bank of Pakistan and the caretaker government in recent months, as well as the new government’s intentions for ongoing policy and reform efforts to move Pakistan from stabilisation to a strong and sustainable recovery.
“Given the timing of the Second Review mission, immediately following the formation of the new cabinet, we expect the review to be considered by the IMF’s Board in late April,” the Fund said in a statement on its website.
Earlier, the finance ministry had announced the schedule of review talks to end on March 18. However, informed sources said that the two sides had hectic sector-wise meetings, impacted by reduced working hours due to Ramazan.
During the talks, sources told Dawn that the two sides had agreed on a set of contingency measures to address gaps in data in case of any slippages for the period ending March 31. The two sides will remain in contact on a timely basis in the run-up to presentation of the country’s case to the Fund’s executive board for approval.
An informed source said that most of the work was completed on Monday which included detailed discussions on upgrading the Anti-Money Laundering (AML) and the Combating the Financing of Terror (CFT) laws in line with best international practices and a detail plan regarding a complete freeze on electricity and gas sector circular debt where the base electricity tariff would be revised with effect from July 1, 2024 in a manner that consumers would face predictable monthly fuel costs.
The plan is to start scaling down the outstanding circular debt, which stands at over Rs3 trillion, including Rs2.3trillion of fresh stock and over Rs700bn parked in Power Holding Company.
Similarly, the consumer-end gas tariff would also be revised upward effective from July 1, 2024, for which the regulatory process would be completed well ahead of the deadline.
Furthermore, the finance ministry had already shared its plan of the Federal Board of Revenue’s (FBR) digitalisation programme with the Fund mission, along with the commitment to improving the tax system for the real estate sector.
For this purpose, related legislation and subordinate legislation will be included in the upcoming federal budget, harmonised with the provinces. Retailers will also be brought into the tax net through compulsory registration.
Previously, the IMF Executive Board had approved the much-needed nine-month arrangement with Pakistan in June “to support its economic stabilisation programme”. The approval had allowed for an immediate disbursement of $1.2bn, with the rest to be phased over the programme’s duration — subject to two quarterly reviews.
In November 2023, a Staff-Level Agreement (SLA) was reached between the IMF staff and country regarding the first review under Pakistan’s SBA. This agreement was contingent upon approval by the IMF’s Executive Board.
In January, the IMF released the much awaited $700 million tranche, shoring up the State Bank of Pakistan’s (SBP) foreign reserves following a successful first review by the Executive Board of the IMF under the agreement.
The country now eyes a “longer and larger” economic bailout package with the IMF, as indicated by the newly elected Finance Minister Aurangzeb Khan in his first formal media interaction.
Meanwhile, a spokesperson for the lender also confirmed that the IMF supported formulating a new economic programme for the country if the new government seeked one.
Subsequently, the primary ministerial meetings are scheduled from April 17 to 19, accompanied by additional events and activities throughout the week from April 15 to 20. Pakistan has communicated its intention to attend the meetings, with the new finance minister slated to lead the delegation.
More to follow
