Pakistan Financial Chief pledges to reach staff-level deal on IMF bail

By Al Mayadeen English
Source: Agencies
10 Feb 2023 20:04

Since January 31, the IMF has been in talks with the Pakistani government to discuss the review of the $7 billion Extended Fund Facility (EFF). The delegation reportedly left on February 9 after failing to reach a staff-level agreement.

People visit a market, where some shopkeeper are using generators for electricity during a national-wide power breakdown, in Islamabad, Pakistan, Monday, Jan. 23, 2023 (AP Photo/Anjum Naveed)

Pakistan's Finance Minister Ishaq Dar announced on Friday that Islamabad received a draft Memorandum of Economic and Financial Policy from the IMF on the completion of the ninth review of a $7 billion loan program.

Since January 31, the IMF has been in talks with the Pakistani government to discuss the review of the $7 billion Extended Fund Facility (EFF). The delegation reportedly left on February 9 after failing to reach a staff-level agreement.

Following the IMF team's departure from Pakistan, the country's Finance Minister Ishaq Dar said the negotiations "concluded successfully" and that the lender's policies were shared with the government as terms to move forward.

Earlier today, Dar told reporters, "I confirm that we received the draft memorandum on economic and financial policy at 9 a.m. today [04:00 GMT]. We will fully study it over the weekend and have a virtual meeting [with the IMF officials]. Obviously, it will take a few days."

"Once the memorandum on economic and financial policy is completed, they [the IMF] will conduct their own internal process, followed by a board meeting. And then finally, when approval is given, [the tranche] will be paid," Dar added while noting that an additional $1.2 billion payment will be wired in special drawing rights once the review is completed.

Once the draft memorandum is submitted, both parties will proceed with discussions on policy measures that are outlined in the document. A staff-level agreement will then be signed and sent to the IMF executive board for approval.

Pakistan, which is on the verge of economic collapse, has been facing a political crisis and is struggling with deteriorating social issues and security.

The country's balance of payments crisis is one of the largest problems striking Pakistan that is causing major instability in the local currency's rate.

Pakistan's foreign exchange reserves have fallen to $2.9 billion to date, as the country now stands at $100 billion in foreign debts and liabilities, scheduled to repay over $26 billion this fiscal year in foreign debts and bridge the country's massive current account deficit due to trade imbalance.

According to the central bank, the current foreign exchange reserves are not enough for even three weeks of imports, while Pakistanis are unable to afford basic foods due to the forty-eight-year high inflation year-on-year.

Despite earlier talks with friendly countries on financial bailouts, Pakistan was forced to give in to the IMF terms as the country faced a very critical economic and financial state and is unable to wait for the results of the talks.

The IMF is pushing Pakistan to back a viable amount of US dollars deposited in domestic banks through guarantees from countries such as China, UAE, and Saudi Arabia, in addition to the World Bank.

Except for basic essential medicines and food, the Asian country has halted giving letters of credit (LOCs), which resulted in a backlog of tens of cargo ships that the country can no longer pay for.

Pakistan has entered previously a dangerous phase following the ousting and assassination attempt on the highly popular former Prime Minister Imran Khan and his accusation that it was a plan his successor Shehbaz Sharif and other governmental figures.

In 2019, Khan negotiated a loan package from the IMF, however, he failed to meet the demands on cutting subsidies and market direct intervention, which caused the issue to be stalled.