ISLAMABAD: International Monetary Fund (IMF) suspects that Pakistan may not receive projected $ 5 billion loans from multilateral and commercial creditors as Islamabad still awaits Memorandum for Economic and Financial Policies (MEFP) draft with only two days left to conclude talks.

Concerned about external front inflows, International Monetary Fund (IMF) is currently seeking confirmation from friendly countries, including Saudi Arabia, China, the UAE and other avenues to secure dollar inflows for Pakistan in order to keep gross foreign exchange reserves at comfortable level.

Talks have reached crucial phase where it can tilt in any direction amid government's hope that it is well-positioned to clinch deal by Thursday. "We cannot say that there is deadlock, as both sides are still engaged with an open mind," senior government functionary said at end of eighth day of talks. He said that IMF sought more information about anticipated provincial cash surpluses before reaching final primary fiscal deficit number.

IMF has not yet shared draft of MEFP with Pakistan, top functionaries told. Any delay could make wind up of talks very challenging in next 48 hours, remaining time in conclusion of scheduled negotiations. Finance Ministry officials hoped that IMF may share first draft of MEFP. If IMF gave first draft, it would require an extra amount of work to agree to all proposed numbers within next 24 hours.

Sources said that main hurdle was power sector, which was hampering finalisation of fiscal tables. Similarly, IMF has issues with gross external financing plan shared by Ministry of Finance.

Sources said that IMF revised downwards projected loans from World Bank by nearly $ 1 billion due to its suspicions about budget support loans. But government team was of view that at least $ 450 million second Resilient Institutions for Sustainable Economy (RISE-II) could be signed subject to staff-level agreement.

Finance Minister Ishaq Dar earlier held meeting with World Bank team, requesting it to consider approval of loans within this fiscal year, according to sources.

One of problems is that even if government agrees to pass on entire Rs 671 billion impact to consumers through price increase, National Electric Power Regulatory Authority would not allow passing on cost of some political decisions and sector inefficiencies to end consumers. A senior government functionary said that gas sector flow will be plugged through tariff increase.

Published in The Daily National Courier, February, 09 2023

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