Stalemate on 9th review: IMF to stay engaged with govt on targets

Our Correspondent
Tuesday, Dec 06, 2022

ISLAMABAD: The International Monetary Fund (IMF) will continue its dialogue and engagement with Pakistan on policies and reforms needed to keep bailout programme’s targets on track and to complete the pending ninth review, a Fund official said on Monday.

“… a key purpose of program reviews in Pakistan, as in all program countries, is to evaluate both program performance to date, as well as, forward-looking, whether the program is on track or policy measures are needed to meet program targets, advance reform objectives, and maintain macroeconomic stability going forward,” Esther Perez Ruiz, IMF’s Resident Chief in Pakistan, said in a written reply.

An IMF review for the release of the next tranche under bailout funding has been pending since September, though Finance Minister Ishaq Dar’s last week said that Pakistan met all targets for the 9th review.

IMF resident chief said discussions with the Pakistani “authorities in these areas are ongoing, especially as not all end-September quantitative targets have been met”. “Significant new developments have taken place since the last program review including the extraordinary floods and a number of new measures and developments, which affect this year’s economic outlook,” Ruiz added.

Official sources said the IMF informed the finance ministry that the Fund required completion of all end-quarter performance criteria and targets. “Both sides would also require broader agreement on forward-looking data on the basis of which the performance targets and indicative targets for the remaining program period till June 2023 will be set,” they added.

In the aftermath of severe floods, all macroeconomic and fiscal frameworks were adjusted altogether so the both sides would have to strike a consensus on the revised macroeconomic framework.

The broader agreement on the revised macroeconomic framework could pave the way for evolving consensus on a staff-level agreement for the completion of the 9th review under the $7 billion Extended Fund Facility (EFF).

With the revised figure of nominal growth in the range of 25 percent, the tax-to-GDP ratio was bound to decline if the FBR achieved its annual target of Rs7.47 trillion for the current fiscal year. Without agreement on revised figures, it would be difficult for striking an agreement between the two sides.

Pakistani authorities are still hopeful that soon the 9th review would be accomplished paving the way for the release of the next tranche of around $1 billion for Pakistan’s struggling economy.

Amid dwindling foreign exchange reserves that touched $7.5 billion, Pakistan requires dollars inflows injection in order to get breathing space. With the possibility of more deposits from a friendly country, the authorities will become in a position to negotiate a better deal with the IMF but if no deposit materialized within the next couple of weeks then the foreign exchange reserves might further deplete in weeks ahead.