Can Pakistan-IMF stalemate see a breakthrough?

Two sides need flexibility to reach an agreement

ISLAMABAD (Web Desk) – As Prime Minister Shehbaz Sharif expressed his confidence to finalise the deal with the International Monetary Fund (IMF), reports have emerged that the world’s top lender may club the 9th and 10th reviews together with the bailout programme for Pakistan scheduled to expire on June 30.

It's the time constraints which have seemingly made the IMF to consider this option as the deadlock persisting since November last year due to the lender’s tough conditions meant that the two sides are unable to reach a final deal and finalise the staff-level agreement.

The latest report comes after it was earlier suggested that the Shehbaz-led government had decided to move ahead with the annual budget preparations without taking any dictation from the IMF.

Read more: Govt may do without IMF lifeline

Pakistan is supposed to get over $2 billion in tranches. However, the staff-level agreement has not been materialised even for the disbursement of $1bn after the completion of 9th review of the Extended Fund Facility (EFF). Two more reviews would be required for the remaining over $1bn as the global lender is not ready to ease the tough conditions.

The IMF is not ready to ease the conditions related to the allocations for the 2023-24 budget and has been seeking details from the government about its approach under the excuse of attaining economic sustainability.

Meanwhile, this report about the clubbing the two reviews together hasn’t been confirmed by the two sides involved in the latest round of talks to ensure a breakthrough.

However, the Ministry of Finance informed Bloomberg that the government had lined up $4 billion in external financing and hoped to strike a deal with the Washington-based lender before unveiling the budget on Friday. Pakistan was committed to completing the IMF programme, the ministry added in an email response to Bloomberg.

Similarly, IMF Resident Representative Esther Perez Ruiz said the programme would restart once the authorities follow the lender's programme goals, present adequate financing while presenting the budget, and there was “proper market functioning” of the Pakistani rupee. "IMF staff continues the engagement with the Pakistani authorities to pave the way for a Board meeting before the current programme expires," Ruiz said.

The main points of contentions are the IMF’s insistence of increasing revenue collection and price hikes of fuel/ utilities while keeping in budget deficit as the government wants to expand targeted subsidies and development budget.

At the same time, the IMF is also not moving an inch on the issue of external financing by the friendly countries like China and Saudi Arabia.

Read more: Agreement between IMF, Pakistan will be subject to financial support by KSA, UAE

Earlier on Monday, the prime minister said, “We are still very hopeful that the IMF programme will materialise. Our ninth review by the IMF will match all terms and conditions and, hopefully, we’ll have some good news this month.”

Read more: PM Shehbaz 'hopeful' of finalising IMF deal this month

In an interview with an international news agency, he added, “We have met all conditionalities. I repeat, each and every requirement of the IMF as prior actions has been met.”

“Some of those actions are usually met after the board’s approval, but this time the IMF required that those actions be met before the board’s approval, so we have met them,” he was quoted as saying.