Talks with IMF going smoothly: SBP chief

Published July 9, 2021
In this 2019 file photo, Reza Baqir, Governor of the State Bank of Pakistan (SBP), takes a question from a reporter (not pictured) during a news conference at the head office in Karachi. — Reuters/File
In this 2019 file photo, Reza Baqir, Governor of the State Bank of Pakistan (SBP), takes a question from a reporter (not pictured) during a news conference at the head office in Karachi. — Reuters/File

WASHINGTON: State Bank of Pakistan Governor Reza Baqir on Thursday said that negotiations with the International Monetary Fund (IMF) on the 6th review of its $6 billion financial package were going smoothly.

Last month, the IMF also said it was holding open and constructive discussions with Pakistan on the 6th review and stood ready to support the country in achieving its objectives of debt sustainability.

In July 2019, the IMF had approved a 39-month $6bn arrangement for Pakistan under its Extended Fund Facility (EFF) to support Islamabad’s economic reform programme.

Although Mr Baqir, a former IMF official, did not say what was causing the delay, the Fund indicated in a recent statement why the 6th review had not completed yet.

Expresses optimism sixth review of $6bn financial package will conclude positively

At a June 25 briefing, IMF spokesperson Gerry Rice told journalists that the completion of the review would “require continued discussions on the sustainable fiscal path, structural reforms, particularly on the tax and energy sectors”.

The two sides, he said, were also holding discussion on “social spending enhancements envisaged in the authorities’ reform programme that’s supported by the IMF resources”.

The SBP governor, who spoke to the Pakistani media after introducing Roshan Digital Initiative to a gathering at the embassy, said he could not tell when the 6th review would conclude but he was confident that it would end positively.

“We [the IMF and Pakistan] share the same goals. We too want to expand our tax net and improve our tax-to-GDP ratio,” Mr Baqir added. “We share the same objectives in other sectors too, such as energy and circular debt. The talks are about how to attain these goals.”

The IMF spokesperson, however, had underlined the need for “accelerated implementation of policies and reforms to address some of the longstanding challenges facing the Pakistani economy” while explaining why the talks remained inconclusive. He also said that a recent mission for talks on the sixth review “could not complete these discussions”, adding that the IMF “remains fully engaged” with the Pakistan authorities to conclude the talks.

Neither Mr Baqir nor the IMF official said if the Fund had halted or continued the disbursement during the interim period.

Last month, Pakistan set a target of 4.8 per cent growth in gross domestic product for the financial year 2021-22 and a fiscal deficit target of 6.3pc. The country surpassed growth projections in the financial year 2020-21 despite a third wave of Covid-19 infections, reaching GDP growth of 3.96pc, after a 0.47pc contraction in 2019-20.

Earlier, media reports suggested that the IMF had postponed the sixth review of its programme for Pakistan and the new assessment would take place in September.

In March, the IMF released a tranche of $500 million for Pakistan after approving four pending reviews of the country’s economic progress. The approval revived the $6bn programme after it remained latent for over a year. The IMF programme has an added advantage as it brings endorsements for the country for other lenders.

Responding to a question, Reza Baqir said the threat of Pakistan being placed on the FATF blacklist was no more there. Pakistan, he said, had fulfilled 26 of the 27 conditions needed for removal from the gray list and expressed the hope that the country would successfully meet the remaining condition as well.

Published in Dawn, July 9th, 2021

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