Islamabad:
The international mission of the monetary fund has returned to Washington without concluding an agreement at the level of staff with Pakistan for the release of more than a billion dollars of loan of loan, but he said that “significant progress” had been made during the talks to conclude an agreement.
One day after the end of the first discussions on the journal, the IMF published a press release which recognized the “strong implementation” of the program. But he was short of the announcement of the staff level agreement, which is essential to maintain economic stability in Pakistan.
One of the reasons for not announcing the agreement was that the IMF has presented the first memorandum project for economic and financial policies (MEFP) in Pakistan just before departure in Washington, senior officials from the Ministry of Finance said. They declared that the agreement would be concluded very soon once a consensus will be reached on the MEFP.
The MEFP is a political document that defines the basis of cooperation during the program period and is revised after the end of each examination program.
The IMF mission head, Nathan Porter, announced by a press release that “the mission and the authorities will continue the political discussions practically to finalize these discussions in the coming days”.
Without the staff level agreement, the IMF management cannot bring the case to Pakistan to the board of directors for the approval and completion of the first examination and the disbursement of the second loan tranche of more than a billion dollars.
“The IMF and the Pakistani authorities have made significant progress to achieve a staff level agreement (SLA) on the first examination under the prolonged 37 -month arrangement under prolonged fund (EFF), said Nathan Porter, the IMF mission chief.
The fluid continuation of the program is essential to the uninterrupted overruns of foreign debts by four bilateral creditors, Saudi Arabia, the United Arab Emirates, China and Kuwait.
The Ministry of Finance gave a detailed briefing on Saturday to Prime Minister Shehbaz Sharif on the results of the reviews of the journal, according to government sources. They declared that the Prime Minister had been informed of the progress and the new structural benchmarks proposed by the IMF.
Pakistan and IMF talks took place from March 3 to 14. Before the EFF mission, the IMF also organized meetings for the $ 1.3 billion in resilience and sustainability (RSF) – The 26th loan package that Islamabad is looking for expenses related to climate change.
Officials of the Ministry of Finance still hoped that the staff level agreement will be concluded in the next two to three weeks. They said the IMF had not had any major problems in implementing the program. However, they added, both sides always adjusted tax targets and linked to the energy sector.
It took almost three months in IMF and Pakistan to reach a staff level agreement for the 25th IMF package of $ 7 billion last year. The talks had ended without agreement on May 23 of last year, but the agreement was concluded on July 12, following approval by the board of directors in September.
Officials of the Ministry of Finance said that most of the discussions had taken place.
Strong implementation
The IMF has recognized the progress of the implementation of key reforms.
“The implementation of the program was strong and the discussions have made considerable progress in several areas,” said Porter.
The head of the mission has added that progress has been made on the budgetary consolidation planned to durably reduce public debt, the maintenance of a monetary policy sufficiently tight to maintain low inflation, the acceleration of reduced cost reforms to improve the viability of the energy sector and the implementation of the Pakistan structural reform agenda to accelerate growth.
He said discussions were also organized to strengthen social protection and rebuild health and education expenses.
The sources said that during talks, the IMF highlighted a regular path of economic growth and to avoid any new sprint which can cause a balance of payments.
The sources said that the IMF had provided an economic growth rate of 2.8% for the next fiscal year, which is slightly lower than the projection revised the decrease in the government of 3.1%. The budgetary objective of economic growth is 3.6%.
The government has made progress on the budgetary front, but it could not undertake structural reforms, said Miftah Ismail, former Minister of Finance.
Provincial governments have introduced the laws of agricultural income tax with a delay, but the implementation has not yet started, which is a violation of the program. Likewise, the government has not changed the law on sovereign funds and it has also implemented the condition of gas manufacturing for power plants in unaffordable captivity with a delay.
The Ministry of Finance fulfilled the conditions on the surplus of the primary budget and increased the period of debt. But the Federal Board of Return did not achieve its tax objectives and the Tajir Dost regime has also failed.
The central bank has achieved its objectives and it has also engaged with the IMF to keep the monetary policy tight, the sources said. The IMF has raised certain concerns concerning the rigidity of the exchange rate regime, but no major change on the track is expected, the sources said.
RSF loan
Nathan Porter said that “progress has also been made in discussions on the climate reform program of the authorities, which aims to reduce the vulnerabilities of the risks linked to natural disasters, and to support the reforms that could be supported in a possible arrangement in the context of resilience and sustainability (RSF).
Pakistan is looking for 1 billion DSB or 1.32 billion dollars new ready to deal with climate change problems. The IMF has proposed 13 conditions for the new loan, including the carbon tax on petroleum products and internal combustion engine cars.
