ISLAMABAD: The International Monetary Fund (IMF) review mission will travel to Pakistan once new governments are established at both the national and provincial levels, expected within two to five weeks following the general elections held on February 8.
The visit by the IMF delegation holds significant importance for finalizing the $3 billion Standby Arrangement (SBA), set to expire on April 12. Subsequently, to prevent a default on foreign debt repayments, discussions will ensue regarding the key components of an anticipated medium-term bailout package.
In a recent staff report, the IMF proposed rescheduling the access for the second review to March 15, 2024, allowing ample time to address the program’s structural requirements.
However, amidst ongoing controversy surrounding the election results, any potential delay in the second review and disbursement of the final tranche worth $1.2 billion under the SBA could raise concerns of an impending economic default. Pakistan’s foreign exchange reserves stood at approximately $8.04 billion as of February 2, 2024, following a decline of $173 million due to external debt payments.
An official from the Finance Division confirmed to The News on Sunday that the IMF would initiate discussions for the second review post the formation of the new government at the national level.
According to the Ministry of Finance, the IMF’s review mission may visit Islamabad by the end of the current month or early the next month, contingent upon the formation of governments at both federal and provincial levels.
The official highlighted that the disbursement of the third tranche of $1.2 billion was subject to the newly elected government assuming office; negotiations for a new agreement would also be finalized with the incoming administration.
Nevertheless, concerns persist over the transparency of the election, with the United States, European Union, and other nations calling for an investigation into reported irregularities and allegations of fraud.
Although the tentative date for the IMF’s review mission was initially set for the first week of February, the visit was postponed due to the general elections.
A delay in the IMF program due to government formation could potentially plunge Pakistan into a severe balance of payments crisis, bringing it close to default once again.
Dr. Khaqan Najeeb, former advisor to the finance ministry, emphasized the timely completion of the second review as the most critical task at hand, based on performance criteria up to the end of December 2023.
The proposed schedule by the IMF suggests March 15, 2024, as the date for Pakistan to access SDRs 828 million. Dr. Najeeb urged authorities to utilize the review visit to discuss the framework of a new program with the IMF, focusing on fiscal and monetary policies, social spending for addressing cost-of-living challenges, and structural reforms, particularly in the energy sector, state-owned enterprise divestment, and climate resilience initiatives.
(Islamabad51_Newsdesk)
