The International Monetary Fund (IMF) said on Thursday that it had made “significant progress” toward reaching a staff-level agreement (SLA) in its talks with Pakistani authorities.
An IMF mission led by Iva Petrova met with Pakistan’s economic team in Karachi and Islamabad from September 24 to October 8 to review the implementation of the $7 billion Extended Fund Facility (EFF) and $1.1bn Resilience and Sustainability Facility (RSF). The programme’s performance as of the end of June this year — the period under review — has been mixed.
Last month, Prime Minister Shehbaz Sharif had urged the lender to take into account the recent flood damage in its review for the country.
In a statement released early on Thursday, the Fund quoted Petrova as saying, “The IMF mission and the Pakistani authorities made significant progress toward reaching a staff-level agreement on the second review under the 37-month extended arrangement under the EFF and on the first review of 28-month arrangement under the RSF”.
“Programme implementation remains strong, and broadly aligned with the authorities’ commitments,” she added.
“Significant progress was made in the discussions in several areas, including sustaining fiscal consolidation to strengthen the public finances while providing needed flood recovery support; ensuring inflation remains durably within the State Bank of Pakistan’s target range by maintaining an appropriately tight and data-dependent monetary policy; restoring the viability of the energy sector by implementing regular tariff adjustments and cost-reducing reforms; and advancing structural reforms to reduce the footprint of the state, strengthen governance and transparency, foster a more competitive business environment, and liberalize commodity markets,” she said.
“Productive discussions were also held on the authorities’ reform agenda to strengthen climate resilience, including the completion of reform measures under the RSF,” Petrova said.
She said that the IMF team and the authorities would continue policy discussions “with a view to settling any outstanding issues”.
She concluded by saying, “The IMF team wants to express its sympathy to those affected by the recent floods, and is grateful to the Pakistani authorities, private sector, and development partners for many fruitful discussions and their hospitality throughout this mission.”
Pakistan and the IMF reached a three-year, $7bn aid package deal in July last year, giving much-needed respite to the nation. The programme aimed to enable Pakistan to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”.
In May this year, the IMF board approved a fresh $1 billion loan to help Pakistan strengthen its economic resilience to climate vulnerabilities and natural disasters. However, the disbursement of funds is contingent upon successful completion of reviews under the EFF, an IMF official said.
Tax hikes not on table for now
Sources told Dawn on Wednesday that another round of discussions may take place on the margins of the World Bank-IMF annual meetings in Washington in the coming days to resolve the last-mile issues.
Finance Minister Muhammad Aurangzeb is scheduled to depart for the United States later this week with a delegation that includes the finance secretary, the State Bank of Pakistan (SBP) governor, and the Federal Board of Revenue (FBR) chairman.
Officials said Islamabad would have to provide verified estimates of flood-related losses and ensure that provinces would absorb these costs from their own resources without compromising cash surplus commitments to the Centre. For the current fiscal year, Punjab is required to provide a cash surplus of Rs740bn, followed by Rs370bn by Sindh, Rs220bn by Khyber Pakhtunkhwa, and Rs185bn by Balochistan.
Sources said that, against this backdrop, the IMF mission did not hold a formal wrap-up meeting with the finance minister before leaving, although both sides met with Prime Minister Shehbaz Sharif, given his recent engagements with the IMF managing director to discuss flexibility in light of the flood damage.
A select team of the IMF mission had reportedly called on the minister on Monday, the sources said.
