Staff Report
ISLAMABAD: The International Monetary Fund (IMF) is pressing Pakistan on policies and reforms necessary to maintain the bailout programme’s targets and complete the upcoming ninth review, but talks between the two parties have reached a standstill, according to an IMF official.
In a written response, Esther Perez Ruiz, the IMF’s resident chief in Pakistan, stated that a major goal of programme reviews in Pakistan, as in all programme countries, is to assess both programme performance thus far and, going forward, whether the programme is on track or whether policy measures are required to meet programme targets, advance reform objectives, and maintain macroeconomic stability.
Since September, the delivery of the following tranche of bailout cash has been subject to an IMF assessment. Ishaq Dar, Pakistan’s finance minister, asserted last week that Pakistan has achieved all of its review-related goals. Since not all end-September quantitative targets have been met, discussions with the Pakistani government “in these areas are ongoing,” the IMF’s local representative added.
Ruiz continued, “Significant new developments, including the unprecedented floods and a number of new policies and changes, have taken place since the last program review, which affects this year’s economic outlook.
The global lender has informed the finance ministry that it requires fulfillment of all end-quarter performance criteria and benchmarks, according to sources with knowledge of the discussions who spoke with the publication.
“Both parties would also require broader agreement on forward-looking data on the basis of which the performance objectives and indicative targets for the remaining program time would be defined for the remaining program time,” they said.
In order for both parties to reach an agreement following the devastating floods, the IMF and Pakistan modified all macroeconomic and fiscal frameworks.
The growing consensus on a staff-level agreement for the conclusion of the ninth review under the $7 billion Extended Fund Facility may be facilitated by the broader agreement on the updated macroeconomic framework (EFF).
If the FBR hit its yearly target of Rs7.47 trillion for the current fiscal year, which was lowered to be in the range of 25%, the tax-to-GDP ratio was destined to fall. A deal between the two sides would be difficult to reach without agreement on the new numbers.
The 9th evaluation is expected to be completed soon, giving Pakistani authorities reason to believe that the country would soon get the next installment of about $1 billion for its struggling economy.
Pakistan needs influxes of dollars to get some breathing room amid declining foreign exchange reserves, which reached $7.5 billion.
The possibility of additional deposits from a friendly nation will put the authorities in a better position to bargain with the IMF, but if no deposits come through in the next few weeks, the foreign exchange reserves may continue to decline.
IMF review’s delay had a negative impact
In the meantime, the IMF review’s delay had a negative impact on the stock market, which fell hard on Monday. After reaching an intraday low of 635 points, the benchmark KSE-100 Shares Index of the Pakistan Stock Exchange (PSX) dropped 537.43 points (1.28%) to close at 41,612 points.
According to Topline Securities’ daily market report, after a marginally positive opening, the market gave in to widespread profit-taking. Investor apprehension over a delay in the IMF’s ninth review and the subsequent approval of a $1.2 billion loan tranche, the brokerage claimed, was the cause of the selling frenzy.
