The International Monetary Fund (IMF) in the last hours of Friday described the implementation of Pakistan from its extended fund (EF) of $ 7 billion as “solid”, but analysts pointed out that an agreement at the personnel level (SLA) had not been signed after conversations with the mission of review of the fund.
The statement comes hours after Pakistan and the IMF concluded the first biannual review of the loan program of $ 7 billion in a positive note, without imposing additional income measures.
On the other hand, the Government promised to maintain fiscal objectives through expenses controls, particularly the development program.
In a statement of mission end, the head of the Nathan Porter mission said: “The implementation of the program has been solid, and the discussions have progressed considerable in several areas, including planned fiscal consolidation to reduce the public debt, the maintenance of a monetary policy sufficiently adjusted to maintain low inflation, acceleration of expensive energy reforms to improve the energy sector.”
An IMF team, led by Porter, visited Pakistan from February 24 to March 14, the statement recalled.
The Fund pointed out that he maintained discussions on the first review of the loan program backed by the EFF “and in a possible new agreement under the IMF RESILism and Sustainability Center (RSF).”
“The IMF and the Pakistani authorities made significant progress to reach a personnel level agreement (SLA) in the first review under the extended agreement of 37 months under the extended fund installation (EFF),” said Porter cited.
He also said that positive discussions were maintained on the “implementation of the Pakistan structural reform agenda to accelerate growth, while strengthening social protection and reconstruction of health and education spending.”
In a possible agreement under the RSF, Porter said that “progress has also been made in the discussions on the authority of the authorities, whose objective is to reduce the vulnerabilities of the risks related to natural disasters and accompanying reforms.”
A separated technical mission of the IMF also visited the country last month on the Pakistan application of more than $ 1 billion in additional financing for climate resilience.
“The mission and authorities will continue policy discussions to end these discussions in the coming days,” added the IMF official.
He extended the background of the background to the “Pakistani authorities, private sector and development partners for fruitful discussions and their hospitality throughout this mission.”
Pakistan and the IMF had reached an aid agreement of three years and $ 7 billion in July 2024, with the new program ready to allow the country to “cimenda macroeconomic stability and create conditions for a stronger, more inclusive and resistant growth.”
The EFF program ongoing 37 months consists of six revisions on the life of the rescue, and the launch of the next section of approximately $ 1 billion will depend on the success of the performance review.
However, economic journalist and Sunrise Columnist Khurram Husain pointed out in X: “Pakistan and IMF failed to reach an agreement at the personnel during the team’s visit to [Islamabad] For the first review of the EF.
“Discussions to continue virtually. The statement says that the implementation of the program is “strong”, but does not provide indications of where the conflict points are, “Husain added.
‘The IMF mission appreciates the general performance’
Official sources had confirmed that the draft of the memorandum of economic and fiscal policies (MEFP) was still ending before the formal announcement of a SLA. This would be followed by the approval of the IMF Executive Board for the disbursement of approximately $ 1.1 billion at the beginning of next month.
The officials said that the most challenging aspect of the two -week commitments referred to gas rates for industrial captive energy plants, but a resolution was reached to the satisfaction of the IMF delegation.
The approval of the law for the introduction of agricultural income tax by the four provincial assemblies was also considered a historical step, and the two parties agreed that it should be done a lot in the field for effective recoveries from the budget next year.
The two parties would remain committed in the coming months to address the technical and procedure problems to align four provinces.
The macroeconomic indicators reviewed, particularly GDP growth projections, led to a downward review of federal tax collection estimates in more than RS600BN. The original budget projection of RS1.29 billion has now adjusted to RS1.23tr.
The officials said that the Mission of the IMF staff appreciated the general performance of the reference points and the objectives, but not without emphasizing the improved collections of the retail and wholesale sectors where the authorities have fought so far to meet the objectives.
The background team also requested improvements of real estate sectors. The Federal Income Board (FBR) reiterated its proposal to relieve taxes on the real estate sector to obtain better recoveries. The two parties can discuss it more in the period prior to next year’s budget.
Estimates of the second quarter for GDP resulted in a downward review in the size of the economy to approximately RS116TR from RS124TR estimated for the current year in the 2024-25 budget. The lowest inflation and economic growth that are projected were considered legitimate factors for the income deficit, but even within the objectives of the relationship imposed on GDP.
Informed sources said that the two parties would remain in contact virtually to finish the MEFP and the SLA and even thereafter for the budgetary consultations of next year.
The sources stressed that for the first time in the previous reviews of the program, the electricity sector had also met its objectives on the reverse of the highest base rates, the lowest interest rates, the stable currency, etc., although the technical losses and the insufficient recoveries worried the IMF mission.
The IMF also emphasized the improvements in the track and trace system in all sectors and a greater implementation of point of sale (POS) systems in commercial activities. He also requested strong efforts to privatize energy distribution companies and Pakistan international airlines.
