© Reuters. FILE PHOTO: Men approach to buy subsidized sacks of flour from a truck in Karachi, Pakistan, January 10, 2023. REUTERS/Akhtar Soomro/File Photo
By Ariba Shahid
KARACHI (Reuters) – Pakistan and the International Monetary Fund will resume online talks next week, they said on Friday, after ten days of face-to-face discussions in Islamabad on how to keep the country afloat that ended without agreement.
With the nuclear-armed nation mired in full-blown economic crisis, IMF talks aim to unlock at least $1.1 billion of stagnant funds as part of a $6.5 billion bailout signed in 2019.
Finance Minister Ishaq Dar told reporters that Pakistan had agreed with the IMF on conditions to release the funds, which have been delayed since last December.
Talks would resume virtually on Monday, he added, citing “routine procedures” for the delay. “We will implement whatever has been agreed between our teams,” Dar said.
In a statement, the head of the IMF’s mission in Pakistan, Nathan Porter, confirmed that talks are continuing and considerable progress has already been made. However, the heist caused the price of the country’s government bonds to fall again.
Pakistan desperately needs a successful outcome. The $350 billion economy is still recovering from last year’s devastating floods, and the government estimates rebuilding efforts will cost $16 billion.
The heavily indebted nation only has enough foreign reserves to cover less than three weeks of crucial imports. The longer it takes to pay off the IMF tranche, the higher the risk of default, analysts say, especially with elections looming.
Last week, Prime Minister Shahbaz Sharif called Pakistan’s economic situation “unimaginable.”
“Ideally, Pakistan should have reached a staff-level agreement by the end of the IMF mission,” Khaqan Najeeb, a former finance ministry adviser, told Reuters.
“The delay is unsustainable.”
GRAPHIC: Pakistan’s payment pain (https://www.reuters.com/graphics/PAKISTAN-CRISIS/znvnbzrrlvl/chart.png)
IMF MEASURES
A so-called staff-level agreement, which must then be approved by the IMF’s Washington headquarters, must be reached before the funds are disbursed.
In addition to the stalled tranche, another $1.4 billion remains from the $6.5 billion bailout program, due to end in June.
Experts said that Pakistan needs the payment as soon as possible. “If this goes on for, say, more than a month, things will get more difficult as our foreign exchange reserves have reached a critical level,” former central bank deputy governor Murtaza Syed told Reuters.
Conditions set by the IMF include a return to a market-based exchange rate and higher fuel prices, measures recently implemented by Pakistan that have already pushed inflation to an all-time high of 27.5% year-on-year in January. and created shortages in some countries. imported goods.
Dar said Pakistan has also agreed with the IMF to introduce fiscal measures, including new taxes.
Analysts fear that further fiscal adjustment could lead the economy into a deeper crisis.
“The government has not only wasted more than five months realizing the gravity of the situation, but is still leading the country into an economic abyss like a sleepwalker,” said Sakib Sherani, who served as the ministry’s top economic adviser. of Finance in 2009-10.