Talks between Pakistan and the International Monetary Fund (IMF) on Wednesday boiled down to two most crucial issues – credibility of government’s assurances and reliability of foreign loans committed by other nations, delaying the handover of Memorandum for Economic and Financial Policies (MEFP).
In order to break the deadlock, Finance Minister Ishaq Dar and IMF Mission Chief Nathan Porter met, away from the media glare and behind closed doors at the PM House. The meeting venue was changed from the finance ministry to the PM House to avoid the media.
Despite the interaction, the government could not convince the mission chief to share the draft of MEFP, which could have given it the real taste of what the IMF was thinking about the presentations made by Pakistani authorities over the past nine days.
The meeting between the finance minister and the IMF mission chief “was good and assurances (were) exchanged”, according to a senior official. But no government official was sure that Pakistan would be able to get the MEFP today (Thursday) and sign it the same day. There was still a dim hope to get the document.
There was a huge external financing gap of at least $4 billion that has to be bridged by China, Saudi Arabia and the United Arab Emirates (UAE) in the shape of additional support by June, according to highly placed government sources.
These nations were looking towards the IMF and the lender was asking Pakistan to take them onboard.
The IMF programme has to remain funded and still there is no convincing plan that could ensure at least $7 billion for debt repayment, money for financing the current account deficit and increasing the low foreign exchange reserves to a decent level, according to a participant in negotiations with the IMF.
There was also disagreement over the net international reserves target, according to the sources.
“The mission chief called on the finance minister and briefed him about the talks and the mission is working on putting it all together and will finalise the MEFP,” said Hamed Yaqoob Sheikh, Secretary Finance, who is the key interlocutor in the talks.
Talks with the IMF continued on Wednesday and focused on the fiscal table and financing, the secretary finance said, adding that there was a broad consensus on the reform actions and measures.
The IMF would share the draft of MEFP only after complete clarity about a few remaining things, said Dr Aisha Ghaus Pasha, Minister of State for Finance, while talking to journalists.
But she added that the government could not increase power tariffs beyond a certain point aimed at putting less burden on the common man.
“We are very near to finalising the negotiations,” said Pasha a day before the talks are scheduled to end but the country still does not have the first glimpse of the key policy document.
Even if the IMF hands over the MEFP today (Thursday), it will require a great deal of effort to go through each and every figure and paragraph of supposedly a voluminous report and then commit to it the same day. In case of haste, the government may end up signing a deal that it will not be able to deliver two months down the line.
Sources said that there could be some prior actions that the IMF would set for calling its board meeting, even if a staff-level agreement was reached before departure.
They said that another issue was the credibility of promises being made by Pakistan, as the IMF kept repeatedly reminding about the unfulfilled commitments given in the past.
“We are ready to commit to what the IMF is asking but the IMF does not trust our words,” said one negotiator on condition of anonymity.
Sources said that some of the issues related to the gas and power sectors were still outstanding that hopefully would be resolved on the last day.
Published in The Express Tribune, February 9th, 2023.
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