After the general elections on February 8th, when new governments may take two to five weeks to form in the center and provinces, Pakistan will host an International Monetary Fund (IMF) review mission.
The conclusion of the $3 billion Standby Arrangement (SBA), which is set to expire on April 12, depends greatly on the presence of the IMF delegation. Subsequently, in order to prevent a foreign debt default, the mission will finalize the key components of the projected medium-term bailout package.
In order to give enough time to finish the program’s structural agenda, the IMF discussed rescheduling access for the second review to March 15, 2024, in a recent staff report.
But given the ongoing dispute over the poll results, there may be reasons to be concerned about an impending economic default if the mission delays completing the second review and releasing the final $1.2 billion tranche under the SBA. The nation’s foreign exchange reserves had a $173 million reduction as a result of the repayment of its external debt, and as of the week ending February 2, 2024, they were roughly $8.04 billion.
The IMF would only arrive to begin the second review talks after the national government had been formed, a Finance Division official revealed to The News on Sunday.
Based on the assessment of the Ministry of Finance, if the federal and provincial levels of government formation are completed, the IMF review team may come to Islamabad by the end of this month or the beginning of the next.
The third and final payment of $1.2 billion, according to the person, was contingent on the newly elected administration taking office again. The new deal will also be concluded in conjunction with the new government.
But there are increasing suspicions about election openness, and the US, the EU, and other nations have expressed their concerns by calling for an examination into the discrepancies and claims of election fraud.
The IMF declined to visit on the eve of general elections, even though the first week of February was the proposed date for the assessment mission.
It would be difficult for all parties to keep to the completion of the last review and the distribution of the third tranche under the SBA program until April 12, 2024, if the review happens in February or March. Subsequently, the prospect of reaching a fresh accord with the IMF may become imminent, as the next budget for 2024–25 can only be concluded by maintaining the IMF’s confidence regarding the crucial aspect of budgetary targets.
In the event that the new administration delays the IMF program, Pakistan would experience a severe balance of payments problem and risk defaulting once more.
The most important task at hand, according to Dr. Khaqan Najeeb, a former adviser to the finance ministry, is completing the second review on time. Performance through December 2023 is the basis for this review, along with continuing criteria.
The availability of SDRs 828 million for Pakistan is scheduled for March 15, 2024, according to the IMF’s projected schedule of reviews. He believed that the Pakistani authorities needed to address the details of a new program backed by the IMF during the review visit. It is envisaged that the authorities are developing the monetary and fiscal frameworks, as well as an agenda of structural changes, specifically for the energy sector’s viability, SOE divestment, and climate resilience. They are also attempting to develop models of social spending for cost-of-living assistance.
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