Pakistan making last-ditch efforts to revive stalled IMF programme

• Hopes are diminishing each day as ongoing programme will expire on June 30.
• If agreement is not struck ahead of budget then ongoing programme will face a failure.
• Pakistan’s options are limited without IMF, says economic expert.

ISLAMABAD: Pakistan is making last-ditch efforts with the International Monetary Fund (IMF) to revive the stalled Extended Fund Facility (EFF) programme, The News reported on Monday.

The hopes are diminishing each day mainly because the ongoing programme of $6.5 billion under the EFF will expire on June 30.

The parleys between Pakistan and the IMF continue for the completion of the ninth review, which was due on November 3 of last year. The formal negotiations started on January 31 when an IMF delegation visited Pakistan for in-person talks.

However, the two sides could not reach a consensus during the course of scheduled talks that ended on February 09. Since then, multiple online sessions have been held but the differences persist on conditions set by the Fund for the Staff Level Agreement (SLA).

If the SLA is not struck ahead of the upcoming budget for 2023-24, scheduled to be unveiled on June 9, the ongoing programme will face a failure.

“There are a couple of options left for moving forward. The first is by signing the SLA on an immediate basis and forwarding Pakistan’s request before the IMF Executive Board for approving the next tranche of $1 billion and also securing an extension in the EFF programme period by a few months in order to accomplish the 10th and 11th Reviews,” sources, privy to the background discussions told the publication.

The second option could be combining the 9th and 10th reviews and for Pakistan to share upcoming budgetary numbers with the IMF.

Then the SLA should be signed after the announcement of the budget and in case of its approval from parliament, the IMF’s Executive Board could approve combined tranches and also grant an extension to the EFF programme for accomplishing the 11th Review by July or August 2023.

“There are no easy options available; both sides will have to work out modalities for evolving consensus. But with the existing approach of maintaining the status quo, no breakthrough can be achieved,” said the official who spoke on the condition of anonymity.

'Options are limited'

Dr Khaqan Najeeb, former Adviser Ministry of Finance, said the heightened political uncertainty, less-than-desirable economic management and inability to secure enough external sector financing may be some of the reasons the country has been unable to secure a staff-level agreement with the IMF.

The delay originally started on November 3 and then after February 10, has brought new areas like the budget and Pakistan’s financing options beyond June 2023 into focus with the IMF. These are not easily answerable queries for a government managing an economy in a crisis-like situation.

“Pakistan’s options are limited and without an IMF programme, the default risk would stay elevated and the reserves weak.”

Options for striking the SLA in the next few days or combining the 9th and 10th reviews and then asking for an extension of the programme beyond June are there but are starting to look difficult, said Dr Najeeb and added that life without the IMF means additional financing from friendly countries, rollovers and commercial financing at higher costs.

But those who know better are aware that this is all temporary as any interim or new setup would have to seek another programme support with the IMF since repayment needs $25 billion.

This would be in addition to monies for current account financing for FY24 and that feels near impossible without the IMF, he concluded.