Islamabad:
The mission of the International Monetary Fund has returned to Washington without reaching an agreement at the personnel level with Pakistan for the release of more than $ 1 billion sections of loan, but said that “significant progress was achieved” during conversations to reach an agreement.
A day after the end of the first review conversations, the IMF issued a press release that recognized the “solid implementation” in the program. But he still did not announce the agreement at the personnel level, which is essential to maintain economic stability in Pakistan.
One of the reasons for not announcing the agreement was that the IMF delivered the first draft of the Memorandum of Economic and Financial Policies (MEFP) to Pakistan just before his departure to Washington, said the senior officials of the Ministry of Finance. They declared that the agreement would be reached very soon once a consensus is achieved in the MEFP.
The MEFP is a policy document that defines the basis of cooperation during the program period and is reviewed after the end of each review program.
The head of the IMF mission, Nathan Porter, announced through a news statement that “the mission and the authorities will continue policy discussions to end these discussions in the next few days.”
Without the agreement at the personnel, the IMF administration cannot take the case of Pakistan to the Board for the approval and completion of the first review and disbursement of the second section of loan of more than $ 1 billion.
“The IMF and the Pakistani authorities made significant progress to reach a personnel level agreement (SLA) in the first review under the extended agreement of 37 months under the installation of extended funds (EFF), said Nathan Porter, the head of the IMF mission.
The fluid continuation of the program is fundamental for the uninterrupted reinvestments of foreign debts by four bilateral creditors, Saudi Arabia, United Arab Emirates, China and Kuwait.
The Ministry of Finance on Saturday gave a detailed information session to Prime Minister Shehbaz Sharif on the results of the review conversations, according to government sources. They said that the prime minister was informed about progress and the new structural reference points proposed by the IMF.
Pakistan and IMF conversations were held from March 3 to 14. Before the EFF mission, the IMF also celebrated meetings for the installation of resilience and sustainability (RSF) of $ 1.3 billion, the 26th loan package that Islamabad is looking for for the expense related to climate change.
The officials of the Ministry of Finance were still waiting for the personnel agreement to be reached in the next two or three weeks. They said that the IMF had no important problems in the implementation of the program. However, they added, both sides were still adjusting the prosecutor and the objectives related to the electricity sector.
The IMF and Pakistan took almost three months to reach an agreement at the personnel level for the 25 billion package of the IMF last year. The conversations had ended without an agreement on May 23 of last year, but the agreement was reached on July 12, after an approval of the Board in September.
The officials of the Ministry of Finance said that most discussions have taken place.
Strong implementation
The IMF recognized the progress in the implementation of key reforms.
The “implementation of the program has been solid, and the discussions have progressed considerable in several areas,” Porter said.
The head of the mission added that progress was made on the planned fiscal consolidation to reduce public debt in a lasting manner, the maintenance of a monetary policy tight enough to maintain low inflation, the acceleration of cost reduction reforms to improve the viability of the energy sector and implementation of the Pakistan structural reform agenda to accelerate growth.
He said that discussions were also held to strengthen social protection and rebuild health and education spending.
The sources said that during the conversations, the IMF emphasized a stable path of economic growth and avoiding any new sprint that can cause a balance of payments.
The sources said that the IMF has projected an economic growth rate of 2.8% for the next fiscal year, which is slightly lower than the projection reviewed of the government of 3.1%. The budget objective for economic growth is 3.6%.
The government advanced on the fiscal front, but could not undertake structural reforms, said Miftah Ismail, former finance minister.
Provincial governments introduced the laws of agricultural income tax with a delay, but the implementation has not yet begun, which is a violation of the program. Similarly, the government has not modified the sovereign law of the background of wealth and also implemented the condition of making gas for captive power plants be unaffordable with a delay.
The Ministry of Finance met the conditions on the surplus of the primary budget and increased the debt expiration period. But the Federal Income Board did not achieve its fiscal objectives and the Tajir Dost scheme did not fail badly.
The Central Bank achieved its objectives and also committed to the IMF to maintain tight monetary policy, the sources said. The IMF raised some concerns about the rigidity in the exchange rate regime, but important changes are not expected on the road, the sources said.
RSF loan
Nathan Porter said that “progress has also been made in discussions on the authority of the authorities, whose objective is to reduce the vulnerabilities of risks related to natural disasters and reforms that could be supported under a possible agreement under the resilience and sustainability center (RSF).
Pakistan is looking for 1 billion SDR or a new loan of $ 1.32 billion to deal with climate change problems. The IMF has proposed 13 conditions for the new loan, including slapping the carbon tax in oil products and internal combustion cars.
