The Express Tribune quoted sources as saying that the agreement was reached after important talks between Pakistan’s newly-appointed Finance Minister Miftah Ismail and IMF Deputy Managing Director Antoinette Saih in Washington.
Subject to the final modalities, the International Monetary Fund (IMF) has agreed that the program will be extended by another nine months to one year against the original end of September 2022, while the size of the loan will be increased from this. Quoting sources, the newspaper reported that from the current USD 6 billion to USD 8 billion.
The IMF is expected to issue a statement on Monday on the development.
The meeting with the IMF team was also attended by Minister of State for Finance Dr. Ayesha Ghaus Pasha, outgoing State Bank Governor Dr. Reza Bakir, Finance Secretary Hamid Yakub Shaikh and Pakistan’s Executive Director at the World Bank, Naveed Kamran Baloch.
Ismail was in Washington to renegotiate the USD 6 billion bailout package stalled by the previous Imran Khan regime.
The Pakistan Tehreek-e-Insaf government and the IMF had signed a 39-month Extended Fund Facility (July 2019 to September 2022) with a total value of USD 6 billion. However, the previous government failed to meet its commitments and the program was stalled for most of the time as 3 billion USD was not paid.
Sources said that before Pakistan’s case is taken to the IMF board for approval, Islamabad will have to agree on a budget strategy for the next fiscal year 2022-23.
At the same time, Prime Minister Sharif’s government must demonstrate that it will undo some of the wrongdoings taken by the former regime against the commitments it made to the IMF board in January this year.
Cash-strapped Pakistan is passing through a period of political and economic uncertainty and the decision to remain in the IMF program longer than the original period will bring clarity in economic policies and calm market turmoil.
The fund release would be a welcome measure for the country’s weak economy, which is reeling from crippling foreign exchange reserves (USD 10.8 billion) and current account deficit.
To finalize the expanded programme, an IMF mission will visit Pakistan from May 10, sources said, adding that the IMF team will be headed by its new mission chief Nathan Porter.
A senior finance ministry official said that upon successful conclusion of the talks, both sides were expected to reach a staff-level agreement.
The technical staff of Pakistan and the IMF will start engagement from Monday to look at the budget situation in light of the “irresponsible” decisions taken by the previous government.
However, before formally securing IMF approval to increase the program size and cash limit, the government must demonstrate that it is sincere in making the necessary tough policy decisions.
Sources said the IMF had asked Pakistan to withdraw fuel and power subsidies, which former prime minister Khan announced on February 28 in “absolute disregard for fiscal discretion” and “lost support” due to double-digit inflation in the country. to do”.
Finance Minister Ismail said last week that the government is subsidizing Rs 21 per liter on petrol and Rs 51.54 per liter on high-speed diesel, which will cost taxpayers Rs 68 billion in April alone. To revive the programme, these subsidies have to be withdrawn.
The newly formed Shahbaz Sharif government, which came to power this month, also has to deal with rising inflation and an economy that refuses to rebound.
In its latest report on Pakistan, the IMF has predicted an annual growth of 4 per cent against the country’s central bank’s estimate of around 4.8 per cent.
On Wednesday, Ismail, in his first press conference as the country’s finance minister, said that the IMF had put forward a list of demands to re-implement the bailout package.
These include withdrawing fuel subsidies, scrapping the tax waiver scheme, raising electricity rates and implementing additional taxation measures.
A few days before he was ousted from power, subsidies on fuel and electricity were implemented by Khan.
A rollback would be a daunting task for the current government, especially at a time when Pakistan’s consumer inflation stood at 12.7 per cent for the month of March.
In Washington, Ismail also held a meeting with the Managing Director of the World Bank and the two sides discussed the possibility of unlocking the WB loan of about USD 1.8 billion, due to the lack of fulfillment of the tasks promised by the previous government. Was stuck because of or because of it. Bureaucratic snag, sources said.
After their meetings in Washington, Ismail will travel to London to meet Pakistan Muslim League-Nawaz (PML-N) supremo Nawaz Sharif.
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