ISLAMABAD: The International Monetary Fund (IMF) has stated in the Memorandum of Economic and Financial Policies (MEFP) that Pakistan will not provide any additional subsidies without prior approval from the lender,
as both parties struggle to reach an agreement on fiscal adjustment plans.
Since late January, Pakistan and the IMF have been negotiating an accord that would transfer $1.1 billion to the cash-strapped, nuclear-armed country of 220 million people.
The problem is a proposal unveiled by Prime Minister Shehbaz Sharif in March to charge wealthier users more for fuel, with the proceeds used to subsidize rates for the poor, who have been struck severely by inflation.
Despite achieving practically all of the Fund’s requirements, the coalition government is still battling to persuade the lender to release the tranche.
A day earlier, the federal government sought US involvement once more to persuade IMF personnel to advance toward a staff-level agreement, despite the fact that Islamabad had met all of the primary conditions outlined in the Fund’s prescriptions.
“Pakistan and the IMF have evolved a broader consensus that Islamabad will not provide any additional subsidy without prior approval of the Fund staff during the remaining period of the ongoing Extended Fund Facility (EFF) programme,” top sources informed on Wednesday.
Thus, the lingering controversy over the proposed cross-fuel subsidy had been largely resolved, which had been one of the major roadblocks to signing the staff-level agreement.
On another difficult issue, the sources stated the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) had extended confirmation to the IMF of more than $2 billion and $1 billion, respectively, on the external funding deficit of $5 billion by the end of June 2023.
The formal agreements with the Kingdom of Saudi Arabia and the United Arab Emirates were expected to be signed soon.
The Pakistani authorities are upset because the IMF required prior acts before signing the staff-level agreement, which has never been done before.
It’s now a chicken-and-egg situation, with the Fund requesting confirmation from commercial banks before signing the agreement, and the banks requesting IMF board approval and the restart of the Fund’s refinancing program for loans worth $2-3 billion.
According to an official statement issued by the Ministry of Finance, Andrew Schofer, Charge’d Affaires of the United States Embassy, paid a visit to Finance Minister Ishaq Dar in the Finance Division.
The minister informed the US diplomat about the current IMF program and assured him that the government was committed to seeing it through to completion.