IMF-Pakistan Talks End Without Staff-Level Agreement, But Progress Made
ISLAMABAD: The International Monetary Fund (IMF) concluded its review talks with Pakistan without reaching a staff-level agreement for the release of over $1 billion under the Extended Fund Facility (EFF). However, both sides reported significant progress and agreed to continue virtual discussions in the coming days.
Key Developments:
- The IMF mission returned to Washington after a 12-day review, citing “strong implementation” of reforms by Pakistan but stopping short of finalizing an agreement.
- A key reason for the delay was the late submission of the first draft of the Memorandum for Economic and Financial Policies (MEFP) by the IMF.
- Without a staff-level agreement, the IMF Board cannot approve the disbursement of the next loan tranche.
- The continuation of the program is crucial for Pakistan’s ability to secure debt rollovers from key allies, including Saudi Arabia, the UAE, China, and Kuwait.
- Discussions also included Pakistan’s request for a $1.32 billion loan under the Resilience and Sustainability Facility (RSF) to address climate change-related challenges.
Economic and Policy Considerations:
- The IMF acknowledged progress in fiscal consolidation, tight monetary policy, and energy sector reforms.
- It projected a 2.8% economic growth rate for the next fiscal year, lower than Pakistan’s revised estimate of 3.1%.
- Structural reform challenges persist, including delays in implementing the Agricultural Income Tax and amendments to the Sovereign Wealth Fund Act.
- The Federal Board of Revenue (FBR) missed its tax collection targets, while energy sector reforms, such as increased gas prices for captive power plants, faced delays.
- The central bank met its monetary policy targets and pledged to maintain a tight stance to control inflation.
While Pakistan has demonstrated strong adherence to IMF conditions, lingering fiscal and structural issues have stalled the finalization of the agreement. The continuation of discussions suggests a possible breakthrough in the coming weeks, but the delay poses risks to financial stability and investor confidence. With external debt rollovers dependent on IMF support, securing the staff-level agreement remains crucial for Pakistan’s economic trajectory.
