By Asif Shahzad
ISLAMABAD (Reuters) -Pakistan expects to conclude talks with the International Monetary Fund over a staff level agreement as soon as this week, the country’s finance secretary said, in a crucial step towards unlocking funds to battle an economic crisis.
An IMF mission spent more than a week in Islamabad earlier this month to discuss a policy framework to allow the release of more than $1 billion in funding from a stalled $6.5 billion bailout package, originally approved in 2019.
However, the mission left without a conclusion.
“The consultations with the IMF are in the final stages. We expect to conclude the consultations soon, even within the week,” Hamed Yaqoob Sheikh, the top official in the finance ministry, told Reuters.
Commerce Minister Syed Naveed Qamar told Reuters during a visit to Washington that IMF approval was “almost there” after two remaining issues involving the country’s power sector had been resolved. He said his government was ready to implement required reforms.
Qamar said the IMF program would allow Pakistan to slowly nurse its economy back to health after the devastation of last year’s flooding, adding his belief that the world commmunity should help Pakistan cope with the impact of climate change.
“I hope the world also realizes that a collapse of Pakistan’s economy would be a global phenomenon,” he said. “It’s not just a local issue for the Pakistani population.”
The IMF’s local representative didn’t respond to a Reuters request for a comment.
The staff level agreement would need approval from the IMF’s board before the funds can be released.
The financing package has been held up since late last year over policy issues, with the IMF requesting a series of fiscal adjustments, including the removal of subsidies, jacking up fuel prices and raising more taxes to bridge a revenue shortfall.
Pakistan has taken steps, such as raising more than 170 billion Pakistani rupees ($648 million) through a supplementary finance bill passed by the parliament on Monday.
Other measures that still need to be taken to finalise the agreement include raising interest rates, which already stand at 17%, as well as obtaining commitments for more bilateral and multilateral funding, officials say.
The IMF funds are critical for the $350 billion South Asian economy, which is facing a severe balance of payments crisis.The fiscal adjustments demanded by the deal, however, are likely to fuel record high inflation, which hit 27.5% year-on-year in January, analysts say.
($1 = 262.5000 Pakistani rupees)
(Reporting by Asif Shahzad; Editing by Alex Richardson, Tomasz Janowski, Sharon Singleton and Lincoln Feast.)
The International Monetary Fund’s (IMF) negotiations with Pakistan and its staff-level discussions over the country’s economic troubles is likely to end this week on a positive note, according to the country’s finance secretary, Farrukh Khan.
The negotiations began in Islamabad last week, and Khan said he is confident that Pakistan and the IMF can reach a deal that is mutually beneficial.
“The IMF delegation is scheduled to leave Pakistan tomorrow and I hope that we will be able to reach an agreement soon,” Khan said in a statement.
The discussions are part of an IMF package that Pakistan is hoping to secure to help it meet its financial commitments and improve its balance of payments. The talks have been focused on ways to reduce the country’s fiscal deficit and the terms of the loan.
Pakistan is seeking between $5 billion to $8 billion from the IMF over the course of the fund’s 18-month loan. The money is intended to help Pakistan pay off its debts, fuel economic growth and help the country address its long-term financial gaps.
Khan said the country has made “significant progress” during the talks and has become closer to finalizing an agreement.
“I hope both sides can reach an agreement that is beneficial for both parties and is consistent with IMF policies,” he said.
The finance secretary’s comments come at a time when Pakistan’s economy is facing serious problems, including a big deficit and high inflation. The country is also lagging behind on economic reforms that it promised as part of a 2015 loan package from the IMF.
If the talks culminate in an agreement, it will be the second time since 2013 that Pakistan and the IMF have come to terms on a bailout package.
It is clear that the IMF is cognizant of the need to come to the aid of the Pakistani government, the people of Pakistan and the wider South Asian region.
The anticipation is that this week’s staff-level negotiations will bring an end to this week of IMF deliberations in Islamabad, paving the way for a successful bailout package that’s good news for both Pakistan and the IMF.