KARACHI: Finance minister Miftah Ismail announced a breakthrough in the country’s talks with the International Monetary Fund (IMF) on Tuesday, saying the government had received a Memorandum of Economic and Financial Policies (MEFP) from the global lending agency, bringing it one step closer to the revival of a stalled $6 billion loan facility.
Pakistan entered the IMF program in 2019. The last disbursement was in February and the next tranche was to follow a review in March, but the government of now ousted prime minister Imran Khan introduced costly fuel subsidies which threw fiscal targets and the program off track. Pakistan’s new government has removed the price caps, with fuel prices going up by around 70 percent in less than a month.
Pakistan is hoping to get the latest tranche as its economy teeters on the brink of crisis, with foreign exchange reserves drying up fast and the Pakistani rupee at record lows against the US dollar.
“Early this morning, the Government of Pakistan has received an MEFP from the IMF for combined 7th and 8th reviews,” the finance minister announced in a brief Twitter post without providing further details.
Pakistan and the IMF were negotiating for the completion of the seventh review to resume the loan program under which it has so far received $3 billion.
Financial experts described the development as a significant step toward the revival of the loan program and the implementation of the seventh and eighth reviews of the Extended Fund Facility (EFF).
“The MEFP is a document that will provide the basis for the conclusion of talks with the IMF,” Dr. Khaqan Najeeb, former adviser to the finance ministry, said. “The MEFP contains all prior actions and instructions, benchmarks and other timelines along with structural issues … So, to move forward with the implementation of seventh and eighth review, it is an important development.”
“This development will be followed by a staff-level agreement, and it signals the revival of the loan program,” Samiullah Tariq, director research at Pakistan Kuwait Investment Company, said.
Pakistan has been seeking a $2 billion increase in the IMF loan along with an extension in its tenure for about a year.
Last week, the government revised its budgetary targets by reversing economic relief for salaried individuals and imposing a super tax on 13 industries.
“The MEFP will lay out major economic policies that will have to be considered by the government while moving forward,” Tahir Abbas, head of research at Arif Habib Limited, said.