IMF wants Pakistan to give assurances on balance of payments deficit
Says Pakistan completed almost all of prior actions except for external financing requirement: Pakistan committed to aligning official, informal foreign exchange rates: Maintains permanent power surcharge on consumers is also among measures planned by Pak
March 6, 2023 02:59 PM
Pakistan is required to give firm and credible assurances to the International Monetary Fund that there is sufficient financing to ensure that its balance of payments is fully financed over the remainder of the programme, said the IMF representative in Pakistan.
According to Reuters, the external financing is one of the last in a string of prior actions the lender wants Islamabad to complete before it clears funding stalled since late last year, Esther Perez Ruiz told Reuters in an e-mailed response on Monday.
Pakistan hopes to sign a staff level agreement with the IMF after over a month of negotiations to settle policy framework issues aimed at curtailing the fiscal deficit ahead of the annual budget around June.
Pakistan has completed almost all of the prior actions except for the external financing requirement the IMF wanted it to for clearing $1.1 billion in disbursements under the $6.5 billion Extended Fund Facility agreed in 2019. The programme ends in June.
"All IMF programme reviews require firm and credible assurances that there is sufficient financing to ensure that the borrowing member's balance of payments is fully financed ... over the remainder of the programme. Pakistan is no exception," IMF's Ruiz said.
Finance Minister Ishaq Dar said last week that the external financing assurance was not one of the IMF's conditions for clearance of the funding.
He said Pakistan needed $5 billion external financing for the balance of payments deficit in the fiscal year ending June 30, adding the IMF believed it should be $7 billion.
The IMF representative also said that Pakistan was committed to align its official and informal foreign exchange market rates, days after the cash-strapped country's currency plunged dramatically.
A permanent power surcharge on consumers was also among measures planned by Pakistani authorities to address energy sector debt, she said.
Finance Minister Ishaq Dar said on Thursday that Pakistan’s negotiations with the Fund related to the completion of the ninth review of a $7 billion loan programme were near conclusion and the staff-level agreement with the global lender would be signed by next week.
The agreement with the IMF on the completion of the ninth review would not only lead to a disbursement of $1.2bn but also unlock inflows from friendly countries.
Pakistan on Thursday completed all prior actions needed for staff-level agreement (SLA) with the IIMF to avert sovereign default and secure the disbursement.
The government approved the continuation of up to Rs3.23 per unit special surcharge on electricity consumers to generate Rs335bn for debt servicing in the next fiscal year, allowing the rupee’s free float and increasing interest rates to 20pc.