Daily Times

Pakistan and the International Monetary Fund failed to reach a staff level agreement on Thursday but agreed to a broad framework aimed at satisfying the lender of the last resort in coming days.

“Actions and prior actions have been agreed, but the staff level agreement will be signed subsequently,” said Secretary Finance Hamed Yaqoob Sheikh.

The development comes as negotiations, which took place from January 31 to February 9, with the global lender – which was visiting Pakistan at the government’s request – and the local authorities concluded in Islamabad.

Finance Minister Ishaq Dar was due to hold a press conference for the much-awaited resumption of the programme, however, his media briefing was cancelled due to the collapse of the talks.

“An agreement has already been struck with the IMF on prerequisite measures. The negotiations with the IMF have been completed. The IMF has handed over the MEFP [Memorandum of Economic and Financial Policies] document [to Pakistan],” the finance secretary said in a statement, without giving further details. The IMF discussed the draft of the Memorandum for Economic and Financial Policies just before the end of the scheduled review talks, leaving no room for the staff level agreement on the same day. To break the deadlock, an unscheduled virtual meeting was held between Prime Minister Shehbaz Sharif and IMF Mission Chief Nathan Porter.

For clinching the MEFP and the Staff level agreement, the government eventually conceded to almost every demand by the IMF.

The Fund has rejected the “gradual approach” proposal of Pakistan, saying everything has to be done upfront. The broad consensus is on leaving the US dollar on the market forces, significantly increasing interest rates and electricity prices, and imposing new taxes.

At the same time, the secretary stressed that the international creditor assured Pakistani authorities of striking a staff-level pact in the coming days and the “agreement for releasing the loan will also be signed soon”. “All matters between the IMF and Pakistan have been agreed upon,” Sheikh said – noting that the Washington-based lender’s mission has also assessed sources of foreign inflows.

It should be noted that during the policy-level talks, the IMF expressed its reservations over the projections made by the Ministry of Finance over external financing inflows from multilateral, bilateral creditors and in the shape of commercial loans.

He further added that the IMF mission, headed by Nathan Porter, would release a detailed statement later after approval from Washington. The IMF’s loan is critical for the country’s $350 billion economy as the State Bank of Pakistan (SBP)-held foreign exchange reserves have fallen to $2.91 billion – enough to provide an import cover of 0.58 months.