Business

IMF to ‘remain engaged’ with Pakistan despite political tumult

Published

12 months ago

Farwa

“Pakistan authorities have committed not to introduce fuel cross-subsidy,” IMF says.
Fund says it sees no indication that Pakistan wants to pause negotiations.
Political crisis in the wake of Imran Khan’s arrest have sparked concerns about IMF programme.

Amid speculations that Pakistan’s chances of clinching a long-suspended International Monetary Fund (IMF) bailout have been reduced due to the political situation, the lender clarified that it “remains engaged” with Islamabad, Bloomberg reported Thursday.

Declining to comment on the arrest of former prime minister Imran Khan, the spokesperson of the global lender said: “IMF remains engaged with Pakistan on securing funding and policy assurances with the goal of reaching an agreement on the ninth review of the $6.7 billion loan agreed in 2019.”

“The IMF sees no indication that Pakistan wants to pause negotiations on disbursement from the current programme,” the spokesperson told the foreign publication.

Following the arrest of the Pakistan Tehreek-e-Insaf (PTI) chairman, concerns sparked that Pakistan was edging closer to a default as political unrest will delay an IMF bailout.

“It looks increasingly difficult for Pakistan to avoid a default in the absence of fresh funding support coming in,” said Eng Tat Low, an emerging-market sovereign analyst at Columbia Threadneedle Investments in Singapore.

“I am also growing more skeptical whether an IMF deal is going to come through. Their heavy debt amortisation against precarious reserves would suggest default is imminent,” he added.

Violent protests erupted in Pakistan on Tuesday with dozens injured across several cities and demonstrators attacking military buildings after Khan was arrested. Moreover, the police initiated a crackdown and arrested the top leadership of the party along with thousands of workers.

The rupee slumped to a record low and slid over 3% a dollar on Thursday. Dollar bonds due 2031 fell to the lowest since November and were indicated at 33.10 cents on the dollar.

‘No petrol subsidy’

Moreover, the Fund also revealed that Pakistani authorities have committed to the lender that petrol subsidy would not be introduced.

“Pakistan authorities have committed not to introduce fuel cross-subsidy scheme in F23 [fiscal year 2022-23] and beyond,” the spokesperson said.

The statement comes as a surprise as Minister of State for Petroleum Dr Musadik Malik, on Tuesday, said that Pakistan aims to address IMF’s concerns before implementing its new fuel subsidy plan.

“The IMF had some reservations about the government’s plan to raise fuel prices for wealthier motorists to finance a subsidy for lower-income people”, he said on Bloomberg TV in an interview.

Malik said: “We originally thought that it was a much simpler idea. We want to make sure now that if we move forward, we take care of their concerns and make sure that they completely understand what we are trying to do and why.”

However, the Washington-based lender has now said that Pakistan has already committed to the Fund that it would not introduce the subsidy.

Business

Pakistan’s $1.1 billion loan tranche is approved by the IMF board.

Published

2 days ago

Farwa

The cash is the third and last installment of a $3 billion standby agreement with the international lender that it obtained to prevent a sovereign default last year and that expires this month.

Following the discussion of Pakistan’s request for the release of funds at today’s IMF Executive Board meeting in Washington, the final tranche was authorized.

Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month about the last assessment of a $3 billion loan package.

The total amount of $1.9 billion that the nation has received thus far is divided into two tranches: $1.2 billion in July and $700 million in January 2024.

According to Finance Minister Muhammad Aurangzeb, Islamabad could have a staff-level agreement on the new program by early July. Pakistan is asking the IMF for a fresh, longer-term loan.

In order to support macroeconomic stability and carry out long-overdue and difficult structural changes, Islamabad says it is seeking a loan for a minimum of three years; however, Aurangzeb has reluctant to specify the specific program in question. If approved, it would be Pakistan’s 24th IMF bailout.

See Also: Pakistan formally requests new IMF assistance

The event transpired on the day following Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva, during which he reaffirmed the government’s resolve to restart Pakistan’s economy.

During the meeting held in conjunction with the World Economic Forum Special Meeting, the prime minister announced that he had given his finance minister, Muhammad Aurangzeb, strict instructions to implement structural reforms, maintain strict fiscal discipline, and pursue prudent policies that would guarantee macroeconomic stability and continuous economic growth.

Georgieva was commended by him for helping Pakistan obtain the $3 billion Standby Arrangement (SBA) from the IMF last year, which was about to be finalized.

Business

Macroeconomic circumstances in Pakistan have improved.

Published

2 days ago

Farwa

By virtue of the Board’s resolution, SDR 828 million, or roughly $1.1 billion, can be disbursed immediately, increasing the total amount disbursed under the arrangement to SDR 2.250 billion, or roughly $3 billion.

After being adopted by the Executive Board on July 12, 2023, Pakistan’s nine-month SBA effectively served as a framework for financial support from both bilateral and multilateral partners, as well as a policy anchor to resolve imbalances both domestically and internationally.

According to the official announcement from the IMF, Pakistan’s macroeconomic conditions have improved during the program. Given the ongoing recovery in the second half of the fiscal year, growth of two percent is anticipated in FY24.

With a primary surplus of 1.8 percent of GDP in the first half of the fiscal year 2024—well ahead of expectations and putting Pakistan on track to meet its target primary surplus of 0.4 percent of GDP by the end of the fiscal year—the country’s fiscal condition is still strengthening.

Even while it is still high, inflation is still falling and should end up at about 20 percent by the end of June if data-driven and adequately tight monetary policy is continued.

In contrast to 11.4 per cent last year, the IMF predicted in an official statement that Pakistan’s tax collection and grants will stay at 12.5% of GDP in FY2024.

After remaining at 7.8% of GDP in FY2023, the deficit is predicted to stay at 7.5% of GDP in FY2024.

Business

Pakistan’s fuel prices should drop.

Published

2 days ago

Farwa

At 0423 GMT, U.S. West Texas Intermediate crude prices fell 13 cents, or 0.16%, to $82.50 a barrel, while Brent crude futures were down 10 cents, or 0.11%, to $88.30 a barrel.

Both benchmarks’ front-month contracts saw losses of over 1% on Monday.

on line with the worldwide trend, the price of gasoline is anticipated to decrease by Rs. 5.4 per liter on the local market. In the same way, buyers in the Pakistani market may see a drop in the price of diesel of Rs8 a litre.

Additionally, it is anticipated that the prices of light fuel and kerosene will decrease by Rs5.40 and Rs8.3 per liter, respectively.

The finance ministry will receive a summary from the Oil and Gas Regulatory Authority (OGRA), and PM Shehbaz Sharif will be consulted before a final decision is made today.

The federal government raised the cost of gasoline by Rs. 4.53 per liter and diesel by Rs. 8.14 per liter at the most recent review.

At the moment, the price of gasoline was Rs 293.94 per liter, while the price of high-speed diesel was Rs 290.38 per liter.