Pakistan and the IMF will begin negotiating on Thursday to release the second tranche of the USD $3 billion loan, worth $710 million

 Pakistan and the IMF will begin negotiating on Thursday to release the second tranche of the USD $3 billion loan, worth $710 million

Last month, SBP Governor Jameel Ahmad said that the central bank was well-positioned to achieve IMF objectives by the end of September.

Pakistan's faltering economy has forced it to contact other countries in search of financial assistance in the form of loans.

The discussions between Pakistan and the IMF to disburse the second tranche of a USD 3 billion loan to the cash-strapped nation to stabilize its debt-ridden economy will begin on Thursday. This presents a significant hurdle for the caretaker administration in advance of the anticipated elections in January. The International Monetary Fund (IMF) will send a review team here on Thursday to examine the economic performance of the nation over the first three months of the current fiscal year, which runs from July to September.

The IMF's resident accountable, Esther Perez, said this week that "the IMF team headed up by Nathan Porter will field an investigation to Pakistan starting on November 2 on the inaugural review under the prevailing Stand-By Arrangement (SBA) of USD 3 billion." The Ministry of Finance said that all relevant data was ready for the review discussions, notwithstanding the IMF's proposal of November 7th, which was made in case the first quarter data collection was delayed. This was reported by the local media.

The international lender with its headquarters in Washington granted the first payment of USD 1.2 billion in addition to authorizing the USD 3 billion loan in July of this year. It was simply a bridging loan, but it gave Pakistan, which was struggling with a severe balance of payments problem and declining foreign currency reserves, a great deal of relief. "Pakistan has fulfilled the key requirement of raising gas prices in addition to achieving the structural objective that was agreed upon with the IMF. In a similar vein, both the fiscal deficit and the circular credit fall within the allowed ranges, as the Express Tribune daily said on Wednesday, prior to the negotiations.

It said that tax receipts for the Federal Board of Revenue had surpassed their predetermined amount. According to the document, there are some challenges with the external finance needed to cover the budget deficit, but they will also be quickly handled because of the guarantees provided by friendly nations like Saudi Arabia, China, and the United Arab Emirates. The review mission stated that if it is pleased with Pakistan's activities, it would propose to the IMF board that the next loan installment be released. The IMF board will then authorize the transfer of USD 710 million to Pakistan in December. For the last several years, Pakistan's economy has been in a free fall mode, which has put immense strain on the country's impoverished population in the form of uncontrolled inflation.

The State Bank of Pakistan and the federal government are still optimistic that they would easily finish the evaluation after fulfilling the requirements set out by the IMF in July. According to well-placed sources, the Pakistani delegation was asked three main issues in almost every meeting of the just concluded IMF-World Bank annual sessions. According to the sources, questions on the mandate of the interim government, the chances of the next elections, and the status and function of the Special Investment Facilitation Council were posed to the officials of the finance ministry.

Although the IMF has not specifically said so, the Ministry of Finance's position at the next review discussions may have been enhanced by having clarity on the timing of the next general election. In contrast to the last unsuccessful USD 6.5 billion initiative, for the last three months, the Ministry of Finance seemed dedicated to fulfilling the requirements for the USD 3 billion program. The finance secretary made sure that everything was transparent and seemed open to the IMF's questions on several occasions. This was not the case in the past, when the Ministry of Finance seemed to be taking its time on the USD 6.5 billion contract that fell through. Due to the inability to finish the USD 6.5 billion Extended Fund Facility, the program dissolved on June 30 with USD 2.6 billion still unpaid.

In July, Julie Kozack, the Director of Strategy and Communication at the IMF, indicated that Pakistan's future depended on the nine-month SBA being implemented with steadfastness. Last month, SBP Governor Jameel Ahmad said that the central bank was well-positioned to achieve IMF objectives by the end of September. He reported a decrease in SBP's forward foreign currency liabilities and a significant achievement of the forward book objective set by the IMF, which was USD 4.2 billion for the end of September 2023.

According to the central bank governor, the SBP is also in a very good position to fulfill the other end-of-September IMF objectives, which are a negative USD 14.5 billion Net International Reserves (NIR) as well as Net Domestic Assets (NDA) of Rs15 trillion. Pakistan's faltering economy has forced it to contact other countries in search of financial assistance in the form of loans. Pakistan has requested Saudi Arabia to provide a USD 1 billion oil credit with delayed payment for the year 2024 ahead of the IMF negotiations.