Govt, IMF Reach Consensus After Successful Parleys: Sources

Govt, IMF Reach Consensus After Successful Parleys: Sources
A consensus has been reached during ongoing negotiations between Pakistan and the International Monetary Fund (IMF), media reports confirmed on Thursday.

As per media reports, a meeting was held between Finance Minister Ishaq Dar and the IMF mission chief, in which Dar was briefed about the developments in the negotiations.

The IMF mission chief informed Dar that a draft of the Mutual Economic and Fiscal Policy (MEFP) was being formulated and would be finalised today.

Sources privy to the development quoted the IMF mission chief as saying that detailed discussions were held with the minister about the negotiations related to fiscal policies.

Pakistan and the IMF were scheduled to hold parleys from January 31 to February 9, 2023.

Earlier, Minister of State for Finance Ayesha Pasha said that Prime Minister Shehbaz Sharif had given approval for the decisions adopted during the negotiations held between the government and the IMF. She added that an agreement with the IMF was urgently needed.

Talks with the International Monetary Fund have entered a conclusive phase. Pakistan will receive a memo from the international lender in this regard soon.

Power losses, recovery, and subsidies on utilities govern the talks, while the Fund has also urged a cut in the defense budget.

The IMF put forth tough conditions as expected, but the Pakistani side was well-prepared as well. The Finance Minister is playing a proactive role, and an agreement may take place soon, says economic expert Asad Ejaz Butt.

The economist told Khabar Say Aagay host Raza Rumi that the Fund wanted Pakistan to cut subsidies and reduce expenditure. "The lender is skeptical about commercial loans, and wants the country to exclude them from its agenda", he added. Butt termed the reforms to curtailing bureaucratic expenditure a major challenge for the policymakers.

Economic expert Niaz Murtaza observed that the current economic crisis needs a ‘surgery’. "Success of talks with the IMF will open the doors for financial aid from China and Saudi Arabia, too."

"Any agreement with the international lender will see a subsequent rise in inflation during the next six months, and this will have an impact on the forthcoming elections as well." Pakistan, he stressed, needs financial reforms so that it doesn’t need to approach the Fund ever again. "Ideally, the talks should result in imposition of taxes on the wealthy. The next elected government will have to opt for reforms and that may be the last opportunity to do so."

Pakistan seeks a $1 billion loan tranche as part of the $7 billion extended fund facility availed in 2019.