The International Monetary Fund (IMF), which is concerned about external front inflows, is currently searching for assurances from friendly countries to secure dollar inflows for Pakistan in order to maintain completely disgusting foreign exchange reserves at a comfortable level. These countries include Saudi Arabia, China, the UAE, and others.
In Islamabad, continued discussions for the ninth review to secure the $1.1 billion tranche are taking place amid concerns about default and rapidly decreasing foreign exchange reserves.
The document of the Agreement of Financial and Economic Policies (MEFP), on the basis of which a staff-level agreement would be reached, has not yet been communicated by the IMF with the Pakistani government.
The proposed MEFP had not been presented by the IMF with Pakistani negotiators as of Tuesday night, but Finance Ministry officials remain optimistic that the staff-level agreement with the mission may be completed by February 9.
The idea of extending the review discussions cannot be ruled out if this does not occur.
The State Bank of Pakistan’s (SBP) slightly over $3 billion in foreign exchange reserves are expected to run out on a weekly and monthly basis. According to sources, the overall foreign exchange reserves may not rise above $6 billion or may reach a maximum of $8 billion.
It is yet unknown how much of a figure the IMF will include in the draught MEFP document. If they do, it would have a significant impact on our ability to attract the much-needed inflows of dollars at a time when we only have about $3 billion.
“The fingers are still crossed as the ongoing parleys may be extended if both sides are unable to resolve the lingering differences on overall fiscal framework and power sector subsidies,” sources aware of the development said and hoped that the IMF mission would share the draft MEFP, along with nine tables, on Wednesday (today) and they would be able to conclude the pending ninth review by Thursday (February 9, 2023).
The Pakistani government does not expect having any additional discussions with the IMF prior to exchanging the MEFP paper. The time range for implementing corrective measures will be decided once the MEFP paper has been distributed.
When questioned, a senior official admitted that the provincial fiscal structure and their spending were still one of the main points of disagreement because the IMF believed that the 750 billion rupee provincial revenue surplus might not be feasible. Therefore, the updated forecasts have to be incorporated into the nation’s overall fiscal framework.
