- Officials suspect IMF delay is political game.
- Formal agreement with KSA is expected to be signed “very soon”.
- Authorities are exploring options to secure another $1-2bn.
ISLAMABAD: Giving the Fund another excuse for putting up a stumbling block in the way of a staff-level agreement, the Pakistani authorities have not yet withdrawn the proposed cross-fuel subsidy scheme in writing to the International Monetary Fund (IMF), The News reported on Thursday.
The lender had raised objections to the proposal, asking Islamabad to share details about the implementation of the plan that was announced without “consultation”.
However, Minister of State for Petroleum Musadik Malik rejected the perception that the subsidy would be a violation of the conditions and said the ministry had responded to all the queries in detail.
The publication, quoting an unnamed finance ministry official, reported today that the IMF didn’t ask for the withdrawal of the cross-fuel subsidy in writing.
It is believed that the Fund is awaiting clarity on the matter and it is one of the reasons for the delay in the agreement.
Meanwhile, top official sources confirmed to the publication that Pakistan has secured assurances on additional external financing of $3 billion from the Kingdom of Saudi Arabia and the United Arab Emirates.
In this regard, a formal agreement with the KSA was expected to be signed “very soon”.
However, the IMF has not been satisfied because it was their assessment that the government would have to manage external financing of $5 billion in order to meet the requirements till the end of June 2023.
“In the context of deteriorated credit ratings and hike in interest rates done by Federal Reserves, the IMF considered that it would be hard for Islamabad to secure more foreign loans in order to manage its vulnerable external position,” a top official said, adding that frustration among the dwellers of Q Block (Ministry of Finance) at Pak Secretariat was increasing.
It was learnt that the officials are convinced that the IMF should have signed the staff-level agreement a long time ago. They suspect the IMF delay is a political game being played with Pakistan and its people.
One official argued that Pakistani authorities were exploring options to secure another $1-2 billion from one of the bilateral friends to meet another condition of the IMF but authorities were reluctant to share the name at this stage. It might be China or any other Muslim state that can come forward to unlock the outstanding deal with Pakistan.
The IMF had asked Pakistan to arrange $6 billion in external financing — a sum that the struggling $350 billion economy needs from now till June to avoid default.
It should be noted that the $6 billion financing gap had been worked out on the assumption that the current account deficit would remain around $7 billion in the current fiscal year.
While Pakistan has received funds worth $1.3 billion from China, an agreement with KSA on additional $2 billion deposits is expected soon. Moreover, the UAE has also pledged financing worth $1 billion.
In reponse to another query, he said that a formal agreement on additional $2 billion deposits from the KSA would be signed “very soon”.
The official sources said that the World Bank had not yet granted its confirmation on the Resilient Institutions for Sustainable Economy (RISE) loan programme along with co-financing of Asian Infrastructure Investment Bank (AIIB) to the tune of $900 million.
Pakistani authorities argued that it would be materialised soon as the government had moved towards harmonisation of GST on services in all the four provinces.
Another stumbling block in the way of signing the staff-level agreement would be the requirement of Rs21 billion for holding elections in Punjab as ordered by the Supreme Court of Pakistan.
Although, the Ministry of Finance was non-committal for the provision of additional funds, all developments occurring at the judicial level are giving confusing signals to the Washington-based lender.
Last, but not the least, the timeframe of the existing IMF programme is another bone of contention which needs to be resolved for moving forward. It is going to expire on June 30, 2023 but the ongoing 9th review has not yet been completed.
The 10th review had become due on February 3, 2023, while the last and final 11th review would become due on May 3, 2023 i.e. in one week.
No one knows how both sides will proceed further as the 9th review could not be concluded despite meeting all major conditions.