LAHORE: In a breakthrough, Pakistan and the International Monetary Fund (IMF) on Wednesday reached a staff-level agreement over the revival of the Extended Fund Facility (EFF) programme.
Although officials from the Ministry of Finance confirmed the same to the local media, a confirmation from the IMF side was not available; however, the fund does not comment on talks with countries before a formal statement has been released. The statement which was expected to be released Wednesday night had not been released til the publishing of this news.Â
Government sources connected with the talks had informed Profit that an agreement has finally been reached and the fund will issue a statement during working hours in Washington DC on Wednesday.
The first tranche is expected to be SDR894 million, equal to $1.2 billion. The program has been extended till July 2023, and total program size increased by $1bn to reach $7bn.
“Pakistan has met all prior actions for the IMF board approval already” the same source told Profit.
The talks had dragged on over questions on the revenue plan, power tariff adjustments, the question of those Independent Power Producers (IPPs) whose tariff has not been renegotiated, the fiscal surplus that the provinces are expected to run, and the quarterly fiscal targets.
“The MOU with the provinces has been signed and shared with the fund” the source tells Profit. Agreement on all the other issues was clinched last night. The government is now expecting an announcement from the IMF by later tonight.
Earlier in June, Pakistan had received the Memorandum of Economic and Financial Policies (MEFP), a document that contains details regarding striking a staff-level agreement,
from the IMF for the seventh and eighth reviews.This was confirmed by Finance Minister Miftah Ismail on his official Twitter handle.
Pakistan unveiled a 9.5 trillion rupee ($47 billion) budget for 2022-23 last month aimed at tight fiscal consolidation in a bid to convince the IMF to restart much-needed bailout payments.
However, the lender later said additional measures were needed to bring Pakistan’s budget in line with the key objectives of the IMF programme.
The two sides held several meetings and agreed on the budget and fiscal measures.
Pakistan had sought an increase in the size and duration of the programme when Ismail met with IMF officials in Washington in April.
Pakistan entered the IMF programme in 2019, but only half the funds have been disbursed to date as Islamabad has struggled to keep targets on track.
The last disbursement was in February and the next tranche was to follow a review in March, but the government of ousted prime minister Imran Khan introduced costly fuel price caps which threw fiscal targets and the programme off track.
Pakistan’s new government has removed the price caps, with fuel prices going up at the pump by up to 70% in a matter of three weeks.
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