KARACHI: Pakistan has to satisfy the International Monetary Fund on three counts, starting with a budget due on Friday (today), before its board reviews whether to release at least some of the $2.5 billion still pending under a lending programme expiring this month, an IMF official said.

Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said on Thursday there was only time for one last IMF board review before the end of the $6.5bn Extended Fund Facility (EFF) at the end of June.

Pakistan has barely enough currency reserves to cover one month’s imports. It had hoped to have $1.1bn of the funds released in November, but the IMF has insisted on a number of conditions being met before it makes any more disbursements.

“As communicated to the authorities, there can be one remaining Board meeting under the current EFF at end-June,” Perez Ruiz said in an email response to Reuters.

“To pave the way for a final review under the current EFF, it is essential to restore the proper functioning of the FX market, pass a FY24 Budget consistent with programme objectives, and secure firm and credible financing commitments to close the $6bn gap ahead of the Board [meeting],” she added.

With just over three weeks to go before the EFF expires, there is a lot the government has to do. The IMF had tasked Pakistan with securing external financing commitments for $6bn from other sources, but so far it has only obtained commitments for $4bn, mostly from Saudi Arabia and the United Arab Emirates.

Under pressure to shift to a more market-determined exchange rate regime and shut down an unofficial currency market, Pakistan removed daily limits on fluctuations earlier this year, but analysts suspect the authorities are still trying to manage the exchange rate, fearing the rupee could fall too far. Perez Ruiz laid out the IMF’s broad expectations for the upcoming budget.

“The focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space to increase social spending,” she said.

More such spending would defray the impact of inflationary pressures on Pakistan’s most vulnerable people, Perez Ruiz added, but the government needed to make more progress to identify spending and revenue-generating measures to achieve this.

Analysts have said Pakistan may need to enter into a new IMF programme after the completion of the current EFF bailout.

But Finance Minister Ishaq Dar told a press conference the current government would not talk to the IMF about any new programme ahead of elections due to take place by November, saying to do so would be “undemocratic and unfair”.

“It will be the prerogative of the new government to negotiate a new programme with the IMF,” Dar said.

Pakistan is reeling from an economic crisis with inflation running at a record 37.97 per cent in May.

The government has imposed taxes, raised energy tariffs and scaled back subsidies in an attempt to persuade the IMF to unlock funding, and its central bank has also raised policy interest rates to a record 21pc.

The IMF has conducted just eight of the 11 reviews that were to take place during the EFF. The last one took place in August last year.

Published in Dawn, June 9th, 2023