Friday, February 17, 2023

IMF surprised at speedy implementation of agreed steps: minister

SBP to brief IMF on monetary policy and foreign exchange reserves targets; staff-level agreement expected next week

A participant stands near a logo of IMF at the International Monetary Fund - World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. — Reuters
A participant stands near a logo of IMF at the International Monetary Fund - World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. — Reuters

  • Pakistan-IMF virtual talks underway to unlock $1.1bn loan tranche.
  • Aisha Ghaus Pasha says IMF engaged with Pakistan's friendly countries.
  • Pakistan has reached policy-level agreement with IMF, says minister.

ISLAMABAD: Minister of State for Finance Aisha Ghaus Pasha said that the International Monetary Fund (IMF) was surprised at the speedy implementation of agreed steps to revive the stalled loan programme, The News reported Friday. 

Speaking to the media persons in Islamabad, Pasha said that the lender has shown its satisfaction with the measures taken by the government to generate additional revenue of Rs170 billion through a supplementary finance bill tabled in the Parliament by Finance Minister Ishaq Dar on Wednesday.

The Pakistan government and the IMF could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks but said negotiations would continue. Pakistan is in dire need of funds as it battles a wrenching economic crisis.

An agreement on the ninth review of the programme would release over $1.1 billion of the total $2.5 billion pending as part of the current package agreed upon in 2019 which ends on June 30. The funds are crucial for the economy whose current foreign exchange reserves barely cover three weeks' worth of imports.

The two sides are holding virtual talks with the financial markets responding positively to the developments.

While replying to a question, Pasha further disclosed that the Washington-based lender was also engaged with Pakistan’s friendly countries, including Saudi Arabia, the United Arab Emirates (UAE) and China, with respect to external financing needs of the country and would apprise the Executive Board.

The minister said that external financing was discussed with the Fund.

“Our talks with friendly countries on external financing are going on and have progressed and we are optimistic that things will move forward.”

The policy-level agreement was reached with the IMF mission before they left the country, however on some wording/language, the government sought details, she added.

SBP to brief IMF

Meanwhile, a The News report stated that Pakistan and the IMF are expected to strike a staff-level agreement next week as the State Bank of Pakistan (SBP) is scheduled to engage with the Fund mission on monetary policy and foreign exchange reserves targets for the current fiscal year.

During the virtual meeting on Thursday night, both sides almost evolved a consensus on the macroeconomic and fiscal framework for the current fiscal year.

“The last two auctions for generating domestic debt have failed to get the desired results mainly because markets are expecting upward adjustments in policy rates,” official sources said.

The IMF wants the real interest rate from negative to positive, so the SBP will have to hike the discount rate at least by 200 basis points.

The government had sought a real gross domestic product (GDP) growth rate target of 1.5 to 2% while CPI-based inflation at 29% without taking into account fiscal and energy sector adjustments undertaken by the government under the prescriptions suggested by the IMF.

“InshaAllah, we expect that the staff-level agreement (SLA) will be signed next week,” a senior official engaged in talks told the publication.