IMF seeks confirmation of external financing for Pakistan agreement

March 08, 2023 (MLN): The International Monetary Fund (IMF) is inching closer to signing a Staff Level Agreement (SLA) with Pakistan as the fund is in the process of seeking confirmation of external financing from all possible avenues, as reported by The News. 

As of now, the Pakistani authorities have implemented all other tough measures and are confident about signing the agreement this week once they receive assurances from creditors.

However, some minor issues remain unresolved as both sides review nine tables of the Memorandum of Economic and Financial Policies (MEFP).

Full implementation of each point is necessary for the SLA to be signed. For example, while the government passed a mini-budget to fetch an additional Rs170 billion by the end of the current financial year, it has yet to notify the imposition of an enhanced GST rate on luxury imported items and locally-manufactured vehicles.

The IMF has sought details from the Ministry of Finance in this regard, and the government has moved a summary for approval from the federal cabinet, after which the Statutory Regulatory Order (SRO) would be issued.

Once this is done, the IMF would seek assurances in writing from Finance Minister Ishaq Dar and the governor of the State Bank of Pakistan through a signed Letter of Intent (LoI) to dispatch this document to the IMF's Executive Board for approval on completion of the 9th Review and release of a $1bn tranche under the $6.5bn Extended Fund Facility (EFF).

Comparing Pakistan's case to Greece's in 2010, an independent economist noted that Greece had to secure confirmation on its external financing needs from the European Union (EU) and other creditors to sign the IMF agreement.

While Pakistan has a limited quota and can only secure almost $3bn from the IMF by the end of June 2023, external financing confirmation from all possible avenues remains the most crucial issue for the SLA to be struck.

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