IMF, Pak fail to strike deal on bailout package

THE TALKS WITH IMF ARE AIMED AT UNLOCKING AT LEAST $1.1 BILLION OF THE STALLED FUNDING AS PART OF A $6.5 BILLION BAILOUT PACKAGE SIGNED IN 2019

KARACHI: Pakistan and the International Monetary Fund are to resume talks online next week they said on Friday, after ten days of face-to-face discussions in Islamabad on how to keep the country afloat ended without a deal.

With the nuclear-armed nation in the grip of a full-blown economic crisis, the IMF talks are aimed at unlocking at least $1.1 billion of stalled funding as part of a $6.5 billion bailout signed in 2019.

Finance minister Ishaq Dar told reporters Pakistan had agreed with the IMF on the conditions to release the funds, which have been delayed since last December.

Talks would resume virtually on Monday, he added, citing “routine procedures” for the delay. “We will implement whatever has been agreed upon between our teams,” Dar said.

An IMF mission led by Nathan Porter visited Islamabad from January 31 to February 9 to hold discussions under the ninth review of the authorities’ programme supported by the IMF Extended Fund Facility (EFF) arrangement.

In a statement, Porter confirmed talks were continuing and that considerable progress had already been made. “Virtual discussions will continue in the coming days to finalise the implementation details of these policies,” he added.

Key priorities include strengthening the fiscal position with permanent revenue measures and reduction in untargeted subsidies while scaling up social protection to help the most vulnerable and those affected by the floods, he said.

Among other priorities include allowing the exchange rate to be market determined to gradually eliminate the foreign exchange shortage; and enhancing energy provision by preventing further accumulation of circular debt and ensuring the viability of the energy sector.

Pakistan is in dire need of a successful outcome. The $350billion economy is still reeling from devastating floods last year, and the government estimates rebuilding efforts will cost $16 billion.

The heavily-indebted nation only has enough foreign reserves to cover less than three weeks of crucial imports. The longer it takes for the IMF tranche to be paid out, the higher the risk of default, analysts say, especially with elections also looming.

Last week, Prime Minister Shahbaz Sharif called Pakistan’s economic situation “unimaginable.”

The finance minister acknowledged that reforms in certain sectors required by the IMF were in Pakistan’s interest, criticising the previous Pakistan Tehreek-e-Insaf-led government for “economic destruction and misgovernance”.

“It is necessary to fix those things. These reforms are painful but necessary,” Dar added.

“It is a standard process which can neither be shortened and hopefully they won’t extend it unnecessarily,” Dar said. The finance minister shared that the country would receive a $1.2 billion disbursement in the form of Special Drawing Rights after the review’s completion.

Outlining the policy measures agreed upon between the government and the IMF, Dar said taxes amounting to Rs 170 billion would be imposed.

He, however, added that the government would try to ensure that the taxes did not directly burden the common man.

To impose the taxes, the government would introduce a finance bill or ordinance, depending on the situation at the time, Dar said.