The International Monetary Fund (IMF) is preparing to review Pakistan’s budget plans for the 2019 fiscal year as part of the lender’s long-awaited financing infusion for the cash-strapped country, the country mission leader of the IMF said on Thursday.
Negotiations over major budget targets such as the fiscal deficit are one of the last barriers to be cleared before the IMF accepts a staff-level agreement to release $1.1 billion in cash, which has been postponed since November and is critical for Pakistan to manage an acute balance of payments problem.
The finance ministry did not immediately respond to a request for comment from Reuters.
“In all IMF programs, the authorities issue a letter of intent associated with the last review outlining their policy intentions for the period after the program,” Nathan Porter, IMF mission chief to Pakistan, told Reuters.
On Thursday, Finance Minister Mohammad Ishaq Dar stated that Pakistan has already completed all preceding actions for the IMF’s 9th assessment.
Previously, the administration stated that the final hurdle for the agreement was foreign financing. To unlock the next tranche of IMF funds, Pakistan must provide confidence that its balance of payments deficit is fully funded for the fiscal year ending in June.
In March and April, the United Arab Emirates, Saudi Arabia, and China provided funds to Pakistan.
The $1.1 billion in cash will be released if the staff level agreement (SLA) for the 9th review, which has been pending since November, is successful.
The funds are part of a $6.5 billion bailout plan granted by the IMF in 2019 and set to expire in June, ahead to the budget. Pakistan has received $3.9 billion up to the eighth review of the current program.
In answer to a question concerning combining the 9th and 10th reviews in light of the upcoming completion of the previous programme, IMF’s Porter stated that the current baseline is to proceed with reviews sequentially.
The country is reeling from an economic crisis with inflation surging to 36.4%, the highest in its history and the highest in South Asia.
The government has removed caps on the exchange rate, imposed taxes, raised energy tariffs, and scaled back subsidies in an attempt to unlock the IMF funding. It has also raised key interest rates to a record 21%.
