The IMF’s mandate is to finalize the key features of the anticipated medium-term relief package
- Pakistan’s foreign exchange reserves remain at around $8.04 billion.
- The third tranche is conditional on a new government taking office.
- Pakistan could face a serious balance of payments crisis.
ISLAMABAD: An International Monetary Fund (IMF) mission is scheduled to visit Pakistan once new central and provincial governments are formed, which could take two to five weeks after the February 8 general elections.
The IMF delegation’s visit is critical to completing the $3 billion Standby Agreement (SBA), which expires on April 12. The mission will then finalize the salient features of the agreement to avoid default on external debt repayments. Anticipated medium-term relief measures.
In a recent staff report, the IMF discussed rescheduling the access deadline for the second review to March 15, 2024, to allow sufficient time to complete the program’s structural challenges. Ta.
However, the completion of the panel’s second round of review and the release of the final tranche worth $1.2 billion under the SBA could be delayed amid lingering controversy over the poll’s results, raising fears of an economic default. may lead to. The country’s foreign exchange reserves hovered around $8.04 billion in the week ending February 2, 2024, after external debt repayments reduced reserves by $173 million.
This was revealed by a finance department official. news On Sunday, the IMF announced that it would begin second round of review negotiations only after government formation is completed at the national level.
According to the Ministry of Finance’s assessment, if government formation takes place at the federal and provincial levels, an IMF mission could visit Islamabad by the end of this month or early next month.
The official said the final and third tranche of $1.2 billion is conditional on the newly elected government returning to power. A new agreement will also be finalized with the new government.
However, the transparency of the election has become increasingly questionable, with countries such as the United States and the EU raising suspicions and demanding investigations into allegations of fraud and election fraud.
The tentative date for the IMF mission was the first week of February, but the IMF refused the visit on the eve of the general election.
If the review occurs in February or March, it will be extremely difficult for both parties to meet the April 12, 2024 deadline for completing the final review and releasing the third tranche under the SBA program. A new agreement with the IMF may be imminent, as the next budget for 2024-25 can only be finalized by giving confidence to the IMF on the salience of key budgetary objectives.
If the IMF program is delayed due to the formation of a new government, Pakistan will face a serious balance of payments crisis and could once again be at risk of defaulting on its debt.
Dr. Khaqan Najeeb, a former advisor to the Ministry of Finance, said: news The most important challenge at hand is completing the second review in a timely manner. This review is based on performance at the end of December 2023 and ongoing standards.
The review schedule proposed by the IMF indicates that SDR 828 million will be available to Pakistan by March 15, 2024. He felt that the Pakistani authorities should use this review visit to discuss the contours of a new IMF-supported program. The authorities are developing a fiscal and monetary framework, an outline of social spending to provide cost-of-living relief, and a structural reform agenda with particular emphasis on the viability of the energy sector, divestment of state-owned enterprises, and resilience to climate change. There is expected.