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Pakistan ‘assures’ IMF of not taking loan from SBP in next fiscal year

Government says it will meet foreign debt obligations on time
Finance Minister Muhammad Aurangzeb and his team begin the second review of Pakistan’s standby arrangement with an IMF delegation on March 14, 2024. Photo via Finance Ministry
Finance Minister Muhammad Aurangzeb and his team begin the second review of Pakistan’s standby arrangement with an IMF delegation on March 14, 2024. Photo via Finance Ministry

Pakistan has assured the International Monetary Fund of not taking the loan from the central bank and meeting all foreign debt obligations on time, sources said on Monday as the two sides began talks for a new bailout package.

The finance ministry formally began talks with the Fund in Islamabad for a new “bigger programme” to implement structural reforms as demanded by the lender in the past.

In the introductory session, the lender’s delegation comprising a dozen members is holding talks with the government.

The South Asian country has not shared the amount of loan it seeks from the Fund, but in February Bloomberg News reported the amount to be at least $6 billion. The country would seek to negotiate an Extended Fund Facility with the IMF, the report added.

Sources added that the government assured the IMF that the Federal Board of Revenue would be bound to timely pay tax refunds while bonds would be issued in the international market for foreign debt payments and improvement in reserves.

Finance Minister Muhammad Aurangzeb told a pre-budget conference on Sunday that the country was seeking a bigger and larger loan programme.

He stressed the need for bringing structural reforms to have economic stability, warning that the country would be seeking its 25th bailout package if necessary measures were not taken to bring stability.

“If we did not do these structural changes, then we will have to go for the 25th programme,” Aurangzeb said while speaking about bringing retailers, shopkeepers, and traders to the tax net and documenting the undocumented economy.

A mission team led by Nathan Porter, IMF’s Mission Chief to Pakistan, would meet with authorities to discuss the next phase of engagement.

“The aim is to lay the foundation for better governance and stronger, more inclusive, and resilient economic growth that will benefit all Pakistanis,” Esther Perez Ruiz, IMF Resident Representative for Pakistan, said in a statement.

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Pakistan last month completed a short-term $3 billion programme, which helped stave off sovereign default, but the government of Prime Minister Shehbaz Sharif has stressed the need for a fresh, longer-term programme.

In its staff report earlier this week, the IMF acknowledged Pakistan’s economic improvement, however, it warned that the outlook remains challenging, with downside risks remaining exceptionally high.

The country narrowly averted default last summer, and its $350 billion economy has stabilised after the completion of the last IMF programme, with inflation coming down to around 17% in April from a record high of 38% last May.

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