Thursday, March 23, 2023

IMF mission to visit Pakistan next week after govt agrees to accept fund’s stringent conditions

An International Monetary Fund (IMF) delegation will visit Pakistan from Jan. 31 through Feb. 9 to resume talks on reviving the stalled loan program, as Islamabad desperately seeks another loan tranche to shore up its continuously depleting foreign exchange reserves.

“At the request of the (Pakistani) authorities, an in-person fund mission is scheduled to visit Islamabad from January 31 to February 9 to continue discussions under the 9th EFF (Extended Fund Facility) Review,” IMF Resident Representative for Pakistan Esther Perez Ruiz said in a statement released on Thursday.

Hinting at the mission’s visit agenda, the IMF official said it would focus on policies to restore domestic and external sustainability in Pakistan, including strengthening the country’s fiscal position with “durable and high-quality measures”, while supporting the vulnerable and those affected by the catastrophic floods in summer 2022.

 Other agenda points as hinted by Esther Perez Ruiz included:

  • Restoring the viability of the power sector and reversing the “continued accumulation of circular debt
  • Reversing the continued accumulation of circular debt
  • Re-establishing the proper functioning of the FX market
  • Allowing the exchange rate to clear the FX shortage

“Stronger policy efforts and reforms are critical to reduce the current elevated uncertainty that weighs on the outlook, strengthen Pakistan’s resilience, and obtain financing support from official partners and the markets that is vital for Pakistan’s sustainable development,” she said.

IMF bailout package

Pakistan, in 2019, entered a $6 billion bailout package with the Washington-based lender, which was increased to $7 billion in 2022 last year. The IMF mission would be in connection to reviving talks on the ninth review of the $7 billion Extended Fund Facility (EFF), an IMF official confirmed on Thursday.

Earlier, the IMF loan program was put on hold for two months due to the incumbent coalition government’s unwillingness to accept certain conditions placed before it by the Fund. While the disagreements are yet to be resolved, Prime Minister Shehbaz Sharif’s government showed a willingness to accept the Fund’s conditions.

The government has indicated that they are finally ready to swallow the bitter pill of the IMF’s “stringent” conditions to revive the loan program.

PKR depreciates steeply

The IMF announcement came hours after Finance Minister Ishaq Dar bowed to let the Pakistan rupee devalue by Rs. 25 against the dollar on Jan. 26 – the highest-ever drop in a single day in the country’s history.

The rupee continued to depreciate steeply in the interbank market on Friday, closing at Rs. 262.6 per dollar, depreciating by Rs7.17 or 2.73% from yesterday’s close, according to the State Bank of Pakistan.

FX reserves hit a nine-year low

Pakistan’s foreign exchange reserves plunged to a staggering $3.678 billion during the week ended on Jan 20, according to the State Bank of Pakistan. The central bank on Thursday said that its FX holdings decreased by $923 million during the week due to external debt repayments to hit a new nine-year low.

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