ISLAMABAD: Pakistan and the International Monetary Fund (IMF) formally began two-week talks on Wednesday. The talks will aim to ascertain the size of the ‘funding gap’ facing Islamabad that must be plugged to avert a balance of payments crisis.

The funding gap to be determined at the end of the talks will become 13th IMF bailout package for Pakistan since the 1980s.

A day before the technical level talks, a statement from Finance Minister Asad Umar set the tone for negotiations in which he claimed that an immediate balance of payments crisis had been “overcome” with the help of bilateral assistance from China and Saudi Arabia. He did not give a figure.

Pakistan to provide Fund full details of Saudi and Chinese loans

A senior official of the finance ministry said the talks would cover data sharing in the first three days. The policy dialogue, according to the official, will start from Monday onwards.

The available IMF funding quota for Pakistan is approximately $6-6.5 billion. The official said that in some facilities this limit could be exceeded. However, the actual quantum of the package will be finalised by Nov 20.

“It is too early to speculate the funding amount now,” the official said.

Pakistan’s last IMF package was negotiated in 2013.

During the meetings, Pakistan will provide details about the Saudi assistance and funding from China and other sources. “We will provide them [IMF] full details regarding all external and internal inflows,” the official said.

According to the official, the IMF team will then measure the year-wise financing gap facing Pakistan’s economy, and then judge the size of the balance of payments support the economy needs in the immediate term as well as the medium-term over the next three years at least.

Pakistan requires approximately $12 billion for balance of payments support by the end of June next year, according to the finance minister.

Last month, the government announced a commitment from Saudi Arabia of $3bn in foreign currency support and another loan of $3bn in deferred payment for oil following a visit to the kingdom by Prime Minister Imran Khan.

Following the visit to China, the finance minister said further assistance would be forthcoming, but added that the size and form had yet to be worked out.

Several other measures were announced during the visit to China which, according to Pakistan, will help reduce pressure on its falling reserves, especially the swapping currency agreement.

The economy deteriorated due to rising current account and fiscal deficits over the past two years. Pakistan, according to the official, will have to enter into an IMF programme to discipline the twin deficits.

In the outgoing fiscal year, Pakistan’s current account deficit swelled to an all-time high of $18bn, while the budget deficit edged up to 6.6 per cent of the gross domestic product.

Published in Dawn, November 8th, 2018