Delay in IMF review team visit increases Pakistan's balance of payments difficulties: Report
Dec 23, 2022
Islamabad [Pakistan], December 23 : The delay in the visit of the International Monetary Fund (IMF) Monitoring Mission to hold the 9th review of the ongoing Extended Fund Facility (EFF) Programme is "increasing Pakistan's balance of payments difficulties on a daily basis." The global capital market where Pakistan can sell bonds has now closed its door as all its traded bonds are selling at steep discounts.
The visit of the IMF monitoring mission scheduled for October end has been delayed amid the differences between Islamabad's commitment to the IMF on fiscal consolidation and its actual decisions.
The talks between Pakistan and IMF continued virtually. However, the differences between the two sides still persisted over tax collection targets, and non-starter energy reforms including hiking of gas tariff, rising circular debt, and expenditure overrun, making it difficult to have consensus on a staff-level agreement for completion of the review.
The talks between Pakistan and IMF continued virtually. However, the differences between the two sides still persisted over tax collection targets, and non-starter energy reforms including hiking of gas tariff, rising circular debt, and expenditure overrun, making it difficult to have consensus on a staff-level agreement for completion of the review.
Pakistan's forex reserves reached USD 6.7 billion, which could be able to cover imports for around four to five weeks, according to Financial Post. Pakistan's immediate include importing 2.5 million tonnes of wheat, 7 million bales of cotton, crude oil worth 6 billion, machinery worth USD 3 billion, LNG, coal and medicines worth USD 3 billion. These imports are becoming difficult for the country as Pakistan's foreign exchange has dried up.
Pakistan has witnessed several instances of initial public defiance to implement IMF conditions. Later, Pakistan backtracks realising that the government's economic difficulties are intensifying. Pakistan Prime Minister Shehbaz Sharif recently said that a "callous IMF" had put shackles on the country and the government's work regarding rehabilitation of flood victims and providing relief to the people had become difficult, according to Financial Post.
Pakistan had submitted estimates for flood-related reconstruction costs in the current Fiscal at PKR 251 billion. As per the Financial Post, the IMF termed them unrealistic and at variance with the Post Disaster Needs Assessment (PDNA) report and asked Pakistan to include these costs in the current budget.
The IMF also expressed reservations regarding the recently announced package by Pakistan's Finance Minister for the agriculture sector and subsidies for concessional electricity to export-oriented sectors, according to the news report. The IMF had called for a reversal of these decisions and called for detailed expenditure and revenue figures.
IMF's Resident Representative for Pakistan Esther Perez Ruiz has asked Pakistan to review monetary and exchange rate policies. She further stated that Pakistan needs to fix multiple economic indicators and analyse the targets for fiscal discipline and deficit control.
As per the news report, Pakistan's leadership has agreed to their demands, however, they want to implement them so that there is no extra burden on the common man. Pakistan is requesting for easing of IMF conditions citing damages caused by floods and expenditure over-runs. Pakistan is not sharing details regarding its economy and its plan of action for reforms.
The IMF has said that it requires the completion of all end-quarter performance criteria and targets, the report said. The global lender could delay the release of funds as Pakistan's Finance Ministry has not given a response to the IMF for starting formal negotiations on the 9th review.
The talks between Pakistan and the IMF have been halted with global lenders pressurising Islamabad on policies and reforms that are needed to keep the bailout programme target on track, as per the Financial Post report. Major foreign businesses operating in Pakistan do not have confidence in the country's economy.
Pakistan's external debt servicing for Financial Year 2023 is at 60 per cent of its exports, which has witnessed a rise from 12 per cent in FY 2011. Pakistan will need USD 33 billion in financing during FY 2023 and requires USD 73 billion to give back the loans of maturity within 3 years.
