Pakistani officials on Monday said they were unable to reach a staff-level agreement for revival of the Extended Fund Facility (EFF) with the International Monetary Fund (IMF). The agreement if reached between both parties would see the IMF relaunch its bailout package for Pakistan.
The IMF staff expressed reservations regarding the PKR9.5 million expenditure for next fiscal year as presented by Pakistani authorities. They also pointed out that revenue measures in the budget, according to IMF estimates, are insufficient to reach the PKR7 trillion target.
Pakistan in 2019 signed an Extended Fund Facility (EFF) agreement with the IMF under which it would have received $6billion but the IMF stopped the flow of funds after the Imran Khan-led government reneged on the non-negotiables.
This also means Pakistani authorities will struggle to bridge the gap between revenue and expenditures and get the updated federal budget for the fiscal year 2022-23 passed by the National Assembly.
An official familiar with the developments told news agency The Dawn the Pakistan finance ministry is yet to receive the memorandum of economic and financial policies (MEFP) from the IMF since some issues remained unresolved. The official told the Dawn they are hopeful issues will be resolved.
The Shehbaz Sharif-led government wants to secure the passage of the 2022-23 budget from the National Assembly next week but it needs to reach an agreement with the IMF to implement the measures suggested in the budget. The budget needs to be passed by June 28 to ensure its legality and implementation with effect from July 1, according to the rules of the Pakistan constitution.
The IMF and the Pakistani government were divided over personal income tax slabs and rates. The Shehbaz Sharif government was then dealt with another blow after Pakistan’s provinces in their own budgets announced measures which created a shortfall of almost one per cent of gross domestic product (GDP). This means that the primary account will suffer a massive deficit.
Pakistani officials are also meeting with US officials for the US treasury department seeking their help in securing the IMF bailout.
People familiar with the developments told news agency the Dawn the US will help Pakistan negotiate a deal with the IMF. The Pakistan envoy to the US Masood Khan met the assistant US trade representative (USTR) for south and central Asia Christopher Wilson where the former urged the US – which is the largest shareholder and wields large influence over IMF – to help secure the bailout.
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