Stalemate persists between IMF and Pakistan over ninth review

• Delay in Pakistan-IMF talks jitters financial markets.
• IMF resident chief says not all end-September quantitative targets have been met.
• Pakistani authorities are still hopeful that soon the 9th review would be accomplished.

ISLAMABAD: Talks between Pakistan and the International Monetary Fund (IMF) are at a stalemate with global lender pushing Islamabad on policies and reforms needed to keep the bailout programme’s targets on track and complete the pending ninth review, a fund official told The News.

“… a key purpose of program reviews in Pakistan, as in all program countries, is to evaluate both program performance to date, as well as, forward-looking, whether the program is on track or policy measures are needed to meet program targets, advance reform objectives, and maintain macroeconomic stability going forward,” Esther Perez Ruiz, IMF’s Resident Chief in Pakistan, said in a written reply.

An IMF review for the release of the next tranche under bailout funding has been pending since September. However, Finance Minister Ishaq Dar claimed last week that Pakistan met all targets for the review.

However, the IMF resident chief said discussions with the Pakistani “authorities in these areas are ongoing, especially as not all end-September quantitative targets have been met”.

“Significant new developments have taken place since the last program review including the extraordinary floods and a number of new measures and developments, which affect this year’s economic outlook,” Ruiz added.

Sources, privy to the talks, told the publication that the global lender has communicated to the finance ministry that it requires completion of all end-quarter performance criteria and targets.

“Both sides would also require broader agreement on forward-looking data on the basis of which the performance targets and indicative targets for the remaining program period till June 2023 will be set,” they added.

Following the catastrophic floods, IMF and Pakistan had revised all macroeconomic and fiscal frameworks were adjusted altogether so both sides could strike a consensus on it.

The broader agreement on the revised macroeconomic framework could pave the way for evolving consensus on a staff-level agreement for the completion of the 9th review under the $7 billion Extended Fund Facility (EFF).

With the revised figure of nominal growth in the range of 25%, the tax-to-GDP ratio was bound to decline if the FBR achieved its annual target of Rs7.47 trillion for the current fiscal year. Without agreement on revised figures, it would be difficult for striking an agreement between the two sides.

Pakistani authorities are still hopeful that soon the 9th review would be accomplished paving the way for the release of the next tranche of around $1 billion for Pakistan’s struggling economy.

Amid dwindling foreign exchange reserves that touched $7.5 billion, Pakistan requires dollars inflows injection in order to get breathing space.

With the possibility of more deposits from a friendly country, the authorities will become in a position to negotiate a better deal with the IMF but if no deposit materialised within the next couple of weeks then the foreign exchange reserves might further deplete in weeks ahead.

Stocks battered

Meanwhile, the stock market reacted negatively Monday and declined sharply due to the delay in the IMF review. 

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index lost 537.43 points (1.28%) to close at 41,612 points after hitting an intraday low of 635 points.

Topline Securities in its daily market report said after a slightly positive opening, the market succumbed to sweeping profit-taking.

“This selling spree can be attributed to investor anxiety over a holdup in IMF’s ninth review and the subsequent approval of a $1.2 billion loan tranche,” the brokerage said.