• Concluding statement from mission ‘expected shortly’, to be followed by staff-level agreement, says finance secy
• Claims delegation waiting for management clearance, has ‘promised’ to share MEFP document in a couple of days

ISLAMABAD: The government said on Thursday it had agreed on a set of prior actions with the International Monetary Fund (IMF) to complete the ninth review of the troubled $7bn Extended Fund Facility (EFF), but a staff-level agreement (SLA) on the Memorandum of Economic and Financial Policies (MEFP) remained elusive at the conclusion of the 10-day talks.

“All issues have been settled and prior actions agreed upon,” said Finance Secretary Hamed Yaqoob Shaikh. He said the SLA would be finalised in the days to come, as the visiting mission had agreed to certain points that were beyond the mandate it came to Pakistan with.

However, he declined to say how many and what prior actions had been agreed upon, saying all these details would follow, probably on Friday.

The mission is now heading back and will explain these matters to the Fund’s management, which could take two to three days.

As it left Pakistan, the IMF delegation, led by its Pakistan mission chief Nathan Porter, barred Finance Minister Ishaq Dar from holding a promised news conference before the IMF head office in Washington cleared a concluding statement.

Mr Shaikh said that unfortunately, the finance minister would not be able to speak to the media as promised because the Fund’s mission was of the view that there should be no discussion before the concluding statement is okayed by Washington.

“They are waiting for it and we are also waiting. They are pursuing,” he said, adding that the government could only talk to journalists once the concluding statement is issued by the IMF.

Responding to a question, he made it clear that the SLA would be reached subsequently and also confirmed that the draft MEFP had not yet been shared with Pakistan by the Fund mission.

He said the government team insisted the delegation should issue a customary end-of-mission statement and share the MEFP as everything had been settled after extensive discussions.

The MEFP is a key document that describes all the conditions, steps and policy measures on the basis of which the two sides declare the staff-level agreement.

But they said they would share the MEFP in a couple of days once they get back to Washington. The finance secretary, however, declined to talk about the agreed prior actions, their sequence and mode of implementation.

Responding to a question, he said the draft of prior actions and nine other tables on macroeconomic data, including fiscal and external support projections, had been shared and discussed by the two sides. “Today, all things have been settled,” he said.

Responding to a question on whether the mission was satisfied with the country’s external inflows from multilateral, bilateral and commercial lenders, the secretary said such assurances are sought at the time of SLA approval by the Fund’s executive board and there was nothing new in that aspect.

He said the mission had completed its deliberations and settled outstanding issues, therefore, there was no reason for them to stay in Islamabad any longer.

Earlier, Minister of State on Finance and Revenue Dr Aisha Ghaus Pasha had told journalists that outstanding issues had been settled and major agreements had also been reached on a reduction in power sector circular debt.

An official said the prior actions committed by the government include an increase in base electricity tariff and gas rates, withdrawal of all unbudgeted energy subsidies given to industrial sectors and a series of taxation measures to be put in place within 10 days for the Fund mission to secure management approval and seek a formal nod from its executive board for the disbursement of about $1.1bn early next month.

Pakistan’s official foreign exchange reserves have already slipped precariously below $2.9bn, which can sustain no more than two weeks of controlled imports.

Mr Shaikh said the government team pushed for completing the talks and clearance of a concluding statement from Washington after extensively discussing everything and concluding all issues.

However, perhaps because of the time difference, this could not be done, though the delegation promised to share the MEFP within a couple of days.

Responding to a question, he said the concluding statement from the IMF mission was expected shortly and latest by Friday morning, but SLA would be reached subsequently.

Earlier on Thursday evening, the finance minister had told journalists outside the Ministry of Finance that he would return soon after a final meeting with the IMF mission and share the agreed details. But he could not get back and kept waiting at the Prime Minister’s House, where Prime Minister Shehbaz Sharif also participated in a meeting with the mission via video link from Lahore.

Sources said the IMF had agreed to relax the fiscal plan to the extent of about Rs500bn spending on flood recovery, leaving about Rs600bn worth of deficit in primary balance to be met through expenditure cuts and additional taxation measures.

The Fund was, however, still not confident about external financing commitments, particularly from friendly countries — Saudi Arabia, UAE and China — besides some other multilateral funding and said Pakistan would have to ensure that these friends provide assurances to the IMF board when it takes up Pakistan’s case for the disbursement of $1.1bn tranche.

The agreed prior actions would now entail upfront implementation of an increase in electricity and gas rates, given the legacy of unfulfilled commitments. The government has agreed to the required power tariff adjustment to cover a nearly Rs950bn gap for the current fiscal year.

Published in Dawn, February 10th, 2023

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