Talks on program resumption to begin from May 18, says IMF

The government of Pakistan will begin a crucial round of talks with the International Monetary Fund on May 18^th. The talks will be held in Doha. In a statement released on Friday the IMF resident representative in Islamabad, Esther Ruiz, confirmed the talks to Profit.

“An International Monetary Fund team will start a staff mission on May 18 with the Pakistani authorities in Doha, Qatar” she said in a short note sent directly to Profit.

This is the first official confirmation from the IMF on the resumption of the talks.

The talks are part of the ongoing 7^th review of the Extended Fund Facility that Pakistan signed in July 2019 but that was suspended in March of 2020 when the Covid lockdowns began. Since then Pakistan has struggled to resume the program. In March 2021 targets for resumption of the program were finalized by then finance minister Hafeez Shaikh, only to be suspended shortly thereafter when Shaikh was summarily dismissed and replaced with Shaukat Tarin as the finance minister.

Tarin struggled with resuming the program until January 2021, when the 6^th review was finally completed and the staff report released the following month. But once again the program was sent into limbo when the Prime Minister announced caps on fuel and power prices.

The new government of Shehbaz Sharif said its top priority was seeking a resumption of the fund program in the face of dwindling reserves and mounting pressures on the exchange rate and the fiscal framework. In his maiden visit to Washington DC starting in April 22, current finance minister Miftah Ismael sought an enhancement of the facility with an additional $2 billion in disbursements and extension of the program will June 2023.

After those consultations, the fund acknowledged receipt of the request from the Pakistani side, but added that “prompt action is needed to reverse the unfunded subsidies which have slowed discussions for the 7th review.”

Former finance minister Shaukat Tarin has claimed, via his personal twitter account, that those subsidies growing out of the price caps were “fully funded”.

The relief which we had given to the people of Pakistan in petrol/ diesel and power rates,is being reversed by the new govt at the insistence of IMF.We had fully funded this relief. I never used to take undue pressure from IMF.#امپورٹڈ_حکومت_نامنظور

— Shaukat Tarin (@shaukat_tarin) April 23, 2022

The 7^th review has remained in limbo ever since as the government deliberates on the implications and modalities of reversing the price caps. The action could see petrol and diesel prices spiralling beyond Rs200 per litre, arguably the largest price jump in a single go in at least a decade. Some reports in recent days suggested the fund is not ready to talk until the reversal of the price caps is undertaken first.

The government is expected to make a decision soon, following the return of Prime Minister Shehbaz Sharif and his cabinet from London where they had gone to “seek counsel” from Nawaz Sharif about how to handle the country’s delicate political and economic situation since they came into power more than a month ago.