The International Monetary Fund (IMF) review mission is set to visit Pakistan after the formation of new governments in the center and provinces, a process expected to take two to five weeks following the February 8 general elections.
This visit holds immense significance for the completion of the $3 billion Standby Arrangement (SBA), due to expire on April 12. To avoid defaulting on foreign debt repayments, discussions during the mission will focus on finalizing the key elements of a potential medium-term bailout package.
The IMF, in its recent staff report, has proposed a rephasing of access for the second review to March 15, 2024, to allow ample time for addressing the program’s structural agenda.
However, concerns over the controversy surrounding election results may delay the IMF’s review mission, potentially impacting the release of the final tranche worth $1.2 billion under the SBA. With foreign exchange reserves hovering around $8.04 billion, a decline of $173 million due to external debt repayments has heightened economic concerns.
A Finance Division official confirmed that the IMF would initiate second review talks only after the formation of the new government at both federal and provincial levels. The visit is tentatively scheduled for late February or early March.
The completion of the second review is critical, based on end-December 2023 performance and continuous criteria. However, uncertainties surrounding election transparency have raised concerns, with the USA, EU, and other countries calling for investigations into irregularities and fraud allegations.
If the review process extends into February or March, meeting the deadline for the final tranche release by April 12 may become challenging. This could lead to discussions on a new program with the IMF, necessitating fiscal and monetary frameworks, social spending plans for cost-of-living relief, and structural reforms, particularly in the energy sector, state-owned enterprise divestment, and climate resilience.
Overall, timely completion of the second review and discussions on a new program are crucial for Pakistan to address economic challenges and maintain financial stability in the face of potential balance of payments crises.
