KARACHI: Pakistani authorities and the International Monetary Fund (IMF) on Tuesday continued policy-level talks centered around measures to bridge a $6.5 billion external financing gap as well as on budget readjustments, exchange rate stability and energy price hikes, officials with direct knowledge of the meetings said.
Pakistan and the IMF are in talks for the completion of the first review of a $3 billion standby arrangement (SBA) signed in July this year. Islamabad has already received $1.2 billion from the fund and is expecting another $700 million after the completion of the latest review.
The IMF team is expected to conclude its Pakistani visit tomorrow, Wednesday.
“Pakistan and the visiting IMF team headed by Nathan Porter are currently engaged in policy-level talks which are broadly focused on external financing, budgetary readjustments and electricity and gas tariff adjustments,” an official of the Finance Division who was not authorized to talk to the media on the record told Arab News.
The finance ministry and the IMF did not respond to messages seeking comment on the talks but Pakistani financial experts are optimistic Pakistan will be able to secure about $700 million from the Fund after the review.
“This review will successfully conclude with some minor tweaks as there is no big barrier,” Dr Sajid Amin, Deputy Executive Director at Sustainable Development Policy Institute (SDPI), told Arab News. “We expect that the review will be concluded within the next 10 days and a formal announcement will be made.”
Amin said an assurance from the UAE on the external financing gap had eased Pakistan’s woes, referring to unconfirmed media reports on Tuesday that the ambassador of United Arab Emirates (UAE) to Islamabad had met the IMF mission chief and said the Emirates would help Pakistan bridge a $6.5 billion external financing gap for the current fiscal year.
The Fund team is also pushing Pakistan to further hike electricity rates after it already raised them by around an average of Rs5.7 per unit in July, leading to nationwide protests.
Financial experts said the impact of new power tariff hikes, if imposed, would have to be managed through regulatory measures.
“The IMF program is for the stabilization of the economy and the funds say the side impacts of the tariff hikes could be managed through measures including targeted subsidies,” Amin said.
Exchange rate stability is another area where the IMF has expressed its concerns.
“IMF has shown doubt about the free float exchange rate and Pakistan has to ensure free float exchange rate for long-term stability,” Yousuf Muhammad Farooq, Director Research at Chase Securities, said.
Reports of successful talks so far have stirred bullish sentiments at Pakistan’s equity market which closed at 56,665 on Tuesday.
“The major factors contributing to the bullish sentiments at the bourse are expected interest rate ease, optimism about successful conclusion of IMF review with all benchmarks met, energy sector reforms and corporate profitability,” Shahid Ali Habib, CEO of Arif Habib Limited (AHL), told Arab News.
