Thursday, July 7, 2022

Pakistan started negotiations with IMF to resume funding for economy

On Wednesday, The talk between Pakistan and International Monetary Fund (IMF) was opened after being significantly delayed. Pakistan resumed a seventh review of the $6 billion bailout plan that was agreed upon in 2019. 

According to a statement released by the country’s Ministry of Finance, “Talks with the IMF mission started today.” According to the report, a group led by Finance Minister Miftah Ismail and the acting governor of the central bank will participate in the meetings online.

According to the statement made by the ministry, a delegation from the finance division has already gone for meetings with the IMF in Doha. The decision will not be made by the IMF until the 25th of May, therefore the talks will continue until then.

As a result of a rising current account deficit and a drop in the amount of money that is held in foreign reserves, the South Asian country is in desperate need of financing from other countries.

Already, Pakistan has approached the lender with a request to extend the terms of its current $6 billion program and expand its overall size.

During his trip to Washington a month ago, Ismail made the request, which was then followed by a statement from the International Monetary Fund (IMF), which it was stated that Islamabad had agreed to pull back unpaid subsidies to the oil and electricity industries.

It is expected that Pakistan will hand out approximately $2 billion worth of subsidies between the months of March and June. Despite Pakistan’s agreement with the IMF, the subsidies have not yet been removed.

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The current government, which assumed power one month ago when Prime Minister Imran Khan was removed from his position, is concerned about the reaction of the public if it decides to remove the subsidies. It has been reported that it is facing a significant economic challenge.

Pakistan has received around half of the $6 billion in aid that has been promised to it so far but, more recent payments have been repeatedly held up because of the IMF’s worries regarding the country’s monetary policy measures.

If the current review is found to be satisfactory, Pakistan would get more than $900 million, which will also free up other forms of external financing.

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