EconomyPakistan

IMF Mission to Visit Pakistan After New Governments Take Charge

Pakistan is expecting a visit from the International Monetary Fund (IMF) mission after the formation of new governments at the federal and provincial levels, following the general elections held on February 8. The visit is crucial for the completion of the $3 billion Standby Arrangement (SBA) that expires on April 12, and for the negotiation of a new medium-term bailout package to avoid a default on foreign debt repayments.

The IMF had postponed its second review of the SBA, which was originally scheduled for the first week of February, due to the elections. The review is based on the performance and criteria of the end of December 2023. The IMF had also rephased the access for the second review to March 15, 2024, in its recent staff report, to allow more time for the completion of the programme’s structural agenda.

However, the controversy over the election results, which have been challenged by some parties and questioned by the USA, EU and other countries, has cast a shadow over the political stability and economic outlook of Pakistan. The delay in the formation of the new governments and the uncertainty over the IMF’s visit could jeopardize the release of the last tranche of $1.2 billion under the SBA, and put Pakistan on the brink of a balance of payments crisis.

A Finance Division official on Sunday remarked that the IMF would only start the second review talks once the new governments were in place, which could take two to five weeks after the elections. The official also said that the last and third tranche of the SBA was conditional upon the new government taking office, and that the new agreement with the IMF would also be finalized with the new government.

According to the Ministry of Finance’s assessment, the IMF’s review mission might visit Islamabad by the end of February or early March, provided that the government formation was done at both the federal and provincial levels. However, this would leave little time for both sides to complete the last review and release the third tranche under the SBA programme before April 12, 20247. Therefore, the possibility of striking a new agreement with the IMF might become inevitable, as the next budget for 2024-25 would also depend on the IMF’s approval of the key budgetary targets.

Dr Khaqan Najeeb, former adviser finance ministry, stated that the most critical task at hand was timely completion of the second review. He also said that the review visit must be used by Pakistan’s authorities to discuss the contours of a new programme supported by the IMF. He hoped that the authorities were working out the fiscal and monetary frameworks, silhouettes of social spending for cost-of-living relief and an agenda of structural reforms, especially for energy sector viability, SOE divestment and climate resilience.

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