The International Monetary Fund (IMF) is seriously considering reverting to a three-month review schedule of Pakistan’s $7 billion bailout package after witnessing several major slippages by the government led by Prime Minister Shehbaz Sharif.
Under the Extended Funding Facility (EFF) $7 billion bailout programme for Pakistan, it was agreed that a progress review would be done every six months.
However, Pakistan’s progress and performance to ensure its compliance with the IMF plan and requirements saw many slippages, forcing the IMF Pakistan mission to land in Islamabad for an unscheduled visit and ensure that the government stays on track.
Sources reveal that the federal ministry of finance is also struggling to keep all provinces in check, thus ringing alarm bells for the IMF and forcing it to reconsider its initial understanding of a bi-annual review.
Under the IMF bailout package for Pakistan, IMF has agreed on compliance to at least 40 conditions to acquire the $7 billion deal.
Pakistan received the first tranche of the deal – about $1.1 billion – six weeks ago as an upfront payment. It was agreed that the remaining $6 billion would be released in six equal tranches after a successful review and completion of half-yearly reviews.
But, with the government facing serious challenges on multiple fronts – including taxation, external financing and fiscal – the IMF mission decided to conduct a three-month review, three months ahead of the scheduled review in March 2025.
Experts say that quarterly reviews are a better option and would keep Pakistan’s economic sail afloat.
“In case of quarterly reviews, the IMF can ensure strong implementation by keeping a close check on the government. The quarterly reviews would also strengthen the hands of the Ministry of Finance to ensure monitoring of the 40 conditions of the IMF,” said economist Shahbaz Rana.
The IMF Mission in Pakistan has already held several rounds of discussion on performance of the Federal Board of Revenue (FBR). It has also held a detailed meeting with the power sector and reviewed performances in relation to implementation of macroeconomic targets. Discussions are also underway to review the status of implementation of the National Fiscal Pact.
It should be noted that Pakistan’s performance during the first quarter of the IMF bailout programme has seen many hiccups, including a shortfall of about Rs 90 billion. FBR, during its briefing, maintained that the shortfall was because of macroeconomic assumptions, which went off the mark, coupled with slow growth in imports, slowing down inflation rate and also because many policy measures did not yield the expected results.
While Pakistan is giving all explanations in its kitty to justify the slippages, the IMF is yet to share its point of view. Reports suggest that the IMF is adamant on bringing a mini-budget, as committed and promised by Prime Minister Shehbaz Sharif.
