Pakistan and the IMF will start their negotiations Thursday for the release of USD 710 million second tranche of a USD 3 billion loan to the cash-strapped country to stabilise its debt-ridden economy - a real challenge for the caretaker government ahead of the elections expected in January. A review mission from the International Monetary Fund (IMF) will arrive here on Thursday and review the country’s economic performance during the first three months of the current fiscal year - from July to September.
“The IMF team led by Nathan Porter will field a mission to Pakistan starting on November 2 on the first review under the current Stand-By Arrangement (SBA) of USD 3 billion,” Esther Perez, the resident representative of the IMF, said last week.
The IMF had proposed November 7 in anticipation of a delay in compiling the first quarter data but the Ministry of Finance assured that all the relevant data was available for the review talks, according to local media reports.
While approving the USD 3 billion loan in July this year, the Washington-based global lender had also released the first tranche of USD 1.2 billion. Although essentially a bridge loan, it offered much respite to Pakistan, which was battling an acute balance of payments crisis and falling foreign exchange reserves. Ahead of the crucial talks, Pakistan was confident to secure the nod of the creditor for release of the second tranche under the short-term loan.
Caretaker Prime Minister Anwaar ul Haq Kakar expressed optimism on Tuesday regarding Pakistan’s upcoming review, Hum News channel reported.
“We have achieved our targets, including revenue goals. We are confident that our negotiations for the second tranche will be successful,” he said.
“Pakistan has achieved the structural bench agreed with the IMF and its important condition of increasing gas prices has also been met. Similarly, the circular credit is also within the prescribed limit and the fiscal deficit is in accordance with the set target as well,” the Express Tribune newspaper reported on Wednesday ahead of the talks. It said that the Federal Board of Revenue’s tax collections have exceeded their set target.
There are some difficulties about the external financing required for the budget deficit, but this issue will also be resolved easily too because of the assurances given by friendly countries including China, the UAE and Saudi Arabia, the paper said. If the review mission is satisfied with Pakistan’s actions, it will recommend the release of the next instalment of the loan to the IMF board, which will approve the release of USD 710 million in December to the country, it added. Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation. The federal government and the State Bank of Pakistan remain hopeful that they will comfortably complete the review on the back of meeting the conditions agreed with the IMF in July. Highly placed sources said that during the recently held IMF-World Bank annual meetings, the Pakistani delegation faced three major questions in almost every meeting.
The finance ministry officials were asked about the status and role of the Special Investment Facilitation Council, the prospects of next elections, and the mandate of the interim government, the sources said. A clarity on the next general election date could have strengthened the hands of the Ministry of Finance during the upcoming review talks, although the IMF has not explicitly attached any such condition.
Unlike the last failed USD 6.5 billion programme, the Ministry of Finance seemed committed to meeting the conditions set for the USD 3 billion programme during the past three months.
