Tuesday, March 14, 2023
ISLAMABAD: Pakistan has approached the United States seeking its help to secure “lenient treatment” from the International Monetary Fund (IMF) amid a delay in signing the staff-level agreement (SLA) due to the Fund’s demand on getting assurances on external finances.
According to a The News report, the IMF has asked Pakistan to get confirmation on external financing needs of $6 to $7 billion from Saudi Arabia, United Arab Emirates (UAE), Qatar and multilateral creditors to fill the gap till the end of June 2023.
After failing to convince the lender, Islamabad is left with no option but to seek help from Washington and its western allies, in order to secure a “lenient treatment” from the IMF for moving towards the staff-level agreement.
The report stated that Minister for Finance Ishaq Dar had established contacts with the US diplomatic corps, based in Islamabad, and made requests to help end the lingering stalemate with the help of the US treasury department.
“Without the blessing of Uncle Sam, things may not move in the desired direction, despite Pakistani authorities claiming that they had implemented all prior actions under the advice of the IMF, which were possible for them. Now the IMF is asking to get 200% assurances from the friendly countries and multilateral creditors to fill the financing gap of $6-7 billion on external account till the end of June 2023,” sources confirmed to the publication.
One official, privy to the ongoing parleys with the IMF, disclosed that the external financing gap has now been reduced from $7 to $6 billion due to the latest talks, but the IMF made it clear that Islamabad would have to get assurances from friendly countries and multilateral creditors for the signing of the SLA.
“The IMF considers that the ball is in the Pakistan court, but Islamabad high-ups say that when the IMF will grant its assent, the external financing gap would be bridged,” added the official.
It is yet to be seen how the IMF and Pakistani sides would proceed further, as each side was holding the other responsible for delay in signing of the much-awaited SLA.
The Fund considers that without full surety of external financing, the ‘sustainability’ of the loan facility could not be guaranteed, said an official.
A senior government official said late in the night that the IMF side held a final meeting with the State Bank of Pakistan (SBP) officials on Monday, and now they hoped that the agreement would be signed in the next few days.
According to the official, the IMF also demanded abolishing the power sector subsidies on a permanent basis, as the Fund staff raised objections that the government had made commitments only till the end of the next financial year 2023-24.
However, the IMF wanted a commitment to abolish power subsidies on a permanent basis; therefore, they asked for bringing changes in the wording of the Memorandum of Economic and Financial Policies (MEFP) in the last meeting, held in the previous week.