• Ministry says lender has indicated staff-level agreement will be signed soon
• Dar virtually attends IMF, World Bank spring meetings

ISLAMABAD: The International Monetary Fund (IMF) on Wednesday indicated the early signing of a staff-level agreement with Pakistan for the completion of the much-delayed ninth review and its approval by the Fund’s executive board for the disbursement of about $1.2 billion.

The Ministry of Finance quoted the IMF’s director for the Middle East and Central Asia department, Jihad Azour, as expressing confidence that the staff-level agreement “will be signed soon followed by the IMF board’s approval”.

Mr Azour, who led an IMF team in a virtual meeting with a government team led by Finance Minister Ishaq Dar, also expected Pakistan to continue towards its progress on the reforms in various sectors and complete the IMF programme in time.

“IMF will play its positive role in bringing economic stability in Pakistan,” he was quoted as assuring Pakistan’s economic team.

IMF’s resident representative in Islamabad and spokesperson in Washington did not respond to requests for comment.

This followed official indications that the United Arab Emirates (UAE) had also assured the IMF that it would extend $1bn financial support as committed earlier after last week’s similar assurances from Saudi Arabia for $2bn support to bridge the external financing gap required to complete the ninth review pending since October last year.

The external financing gap had been hampering the staff-level agreement for more than two months in completing the ninth review of the $6.5bn Extended Fund Facility (EFF), which has been in limbo since October.

“Finance Minister thanked Director Jihad Azour and his IMF team for support extended in completing 9th Review,” according to the statement, which said Mr Dar attended the IMF and World Bank’s spring meetings through Zoom from Islamabad with a high-level IMF team headed by Mr Azour.

Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha and special assistants to the prime minister on finance and revenue, Tariq Bajwa and Tariq Mehmood Pasha, attended the meeting virtually from Islamabad.

Pakistan’s Ambassador to the US Masood Ahmad Khan, State Bank of Pakistan’s Governor Jamil Ahmad, Finance Secretary Hamed Yaqoob and Economic Affairs Division Secretary Dr Kazim Niaz participated in person from Washington.

The two sides discussed the progress made with the ongoing IMF programme, particularly talks held with the IMF mission during their visit to Pakistan and the implementation of prior actions.

Mr Dar explained that due to important local commitments, the prime minister had asked him to stay in Pakistan, due to which he had to cancel his scheduled visit to Washington and therefore, he was attending the necessary meetings online from Pakistan.

He told the IMF team about the economic challenges being faced by the country and the government’s plan for bringing about macroeconomic stability in the country.

He said Pakistan had already completed all prior actions for the ninth review under the IMF bailout package and the government of Pakistan was fully committed to fulfilling its obligations as agreed with the Fund. Mr Dar also recalled that the only IMF programme completed successfully was under his previous tenure as finance minister.

The government has already met other prior actions by imposing Rs170bn additional taxes for the remaining fiscal year and Rs500bn through the next year; over 300 basis-point increase in central bank’s policy rate to a record 21pc; unprecedented hike in electricity rates including through permanent surcharge on honest consumers to fill the gap of mismanagement and governance crisis; up to 124pc increase in gas rates; and complete market-based exchange rates.

On successful completion, Pakistan would be entitled to 894 statutory drawing rights (SDRs) of the IMF with a calculated value of $1.2bn.

The tranche has been held since October because of the government’s reluctance to allow free movement of the exchange rate, increase in the interest rate and full-cost recovery of power supply through additional surcharges and other adjustments to generate more than Rs800bn in less than two years.

Published in Dawn, April 13th, 2023