Pakistan & IMF unable to reach agreement on MEFP under $6 billion Extended Fund Facility

The Memorandum of Economic and Financial Policies (MEFP) between the Pakistani government and the International Monetary Fund (IMF) for the completion of the Sixth Review under the USD 6 billion Extended Fund Facility (EFF) has not yet been finalised, according to local media. In terms of the international money lender's circumstances, Islamabad has found itself in a difficult position. According to Geo News, whether the IMF loans are used or not, Pakistan faces hazards.

The State Bank of Pakistan's foreign currency holdings has fallen by USD 1.6 billion in the last two weeks as Islamabad paid USD 1 billion on the maturity of an international Sukuk Bond. This week, the Sensitive Price Index (SPI) was 14.5%, up 1.4% from the previous week. According to Geo News, the SPI increased by 1.4% in a week due to changes in Pakistan Oilfields Limited (POL) and electricity rates, as well as the rupee's depreciation versus the dollar.

Shaukat Tarin left Washington without completing the talks

Shaukat Tarin, the Pakistan Adviser on Finance and Revenues, who was in Washington for MEFP meetings, left without completing the talks to join Prime Minister Imran Khan's official entourage in Saudi Arabia. IMF Resident Chief in Pakistan Teresa Daban Sanchez remarked in a quick response about the situation on Friday that they are still working on it.

When asked why there was a deadlock despite claims by Pakistan's economic team that they were very close to an agreement, sources said that in the aftermath of the last budget for 2021-22 and rising international prices, all macroeconomic targets became irrelevant, necessitating massive fiscal, monetary, and exchange rate adjustments, according to the Daily Times. The government found it impossible to make substantial changes on all economic fronts as it neared the end of its five-year term, with only one-and-a-half years remaining.

The IMF wants to see progress on privatisation

The IMF wants to see progress on privatisation to sell loss-making companies like the Pakistan Steel Mills and the PIA. According to the Daily Times, the Fund also wants DISCOs to be privatised to make the power sector profitable. The PTI-led administration intends to propose a large subsidy package, but its funding is unknown.

(Inputs from ANI)

Image: AP