IMF, Pakistan agree to continue current program

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Pakistan IMF

IMF team to discuss petrol, power subsidies in May

The Pakistan government has successfully negotiated with the International Monetary Fund on Sunday and both came to the conclusion that the current program should continue.

The government and IMF also agreed that the subsidy given by the previous government on electricity and petrol would be abolished in phases. This means petrol and electricity prices will increase further.

Pakistan and the International Monetary Fund agreed, in principle, to extend the stalled bailout programme by up to one year and increase the loan size to $8 billion, giving markets the much-needed stability and a breathing space to the new government.

The understanding was reached between Finance Minister Dr Miftah Ismail and IMF Deputy Managing Director Antoinette Sayeh in Washington, sources told media on Sunday.

Subject to the final modalities, the IMF has agreed that the programme will be extended by another nine months to one year as against the original end-period of September 2022, the sources added.

The size of the loan would be increased from the existing $6 billion to $8 billion – a net addition of $2 billion, a senior government functionary requesting anonymity said. The IMF is expected to issue a statement on Monday (today) in this regard.

The previous PTI-led government and the IMF had signed a 39-month Extended Fund Facility (July 2019 to September 2022) with a total value of $6 billion. However, the previous government failed to fulfil its commitments and the programme remained stalled for most of the time as $3 billion remained undisbursed.

Minister of State for Finance Dr Aisha Ghaus Pasha, outgoing State Bank Governor Dr Reza Baqir, Finance Secretary Hamid Yaqoob Sheikh and Pakistan’s Executive Director to the World Bank Naveed Kamran Baloch also participated in the meeting with the IMF team.

To give a final shape to the extended programme, an IMF mission would visit Pakistan likely from May 10, the sources said. The IMF team will be led by its new mission chief, Nathan Porter. On the successful conclusion of talks, it was being expected that both the sides would reach a staff-level agreement, a senior finance ministry official said.

The technical staff of Pakistan and the IMF would start engagement from Monday to see the budget position in light of the “irresponsible” decisions made by the previous government.

However, before formally securing the IMF approval for increasing the programme size and the cash limit, the government will have to show that it is sincere in making the needed tough policy decisions.

Finance Minister Miftah Ismail on Sunday agreed with International Monetary Funds’ recommendations to reduce fuel subsidies phase-wise. Miftah Ismail held a meeting with the executive directors of the International Monetary Fund in Washington for the revival of the Extended Fund Facility programme.

The talks over the seventh review between Pakistan and the IMF have also been completed, as there were four rounds of negotiations between Pakistan and the IMF.

Sources privy to the matter said that Pakistan and IMF have agreed to start technical talks from Tuesday, adding that the data will come out after the technical level talks.

 

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