A Pakistani official announced that virtual talks between the International Monetary Fund (IMF) and Pakistan will start on Monday as the two parties try to strike an agreement to release funds that is necessary to keep the cash-strapped nation afloat.
The two sides were unable to come to an agreement last week, and after 10 days of deliberations, a visiting IMF group left Islamabad with the promise that talks would continue. Pakistan is suffering from a severe economic crisis and is in desperate need of money.
Finance Secretary Hamed Yaqoob Sheikh informed in a text message that talks would resume on Monday but that the length of the discussions could not be determined.
The goal of discussions is to develop an understanding of a reform agenda under the nation’s $6.5 billion bailout program, which it enrolled in January 2019. Over $1.1 billion would be released if the ninth evaluation of the program could be agreed upon.
Following strong drops on Friday due to rumors that a deal with the fund had not yet been reached, Pakistan’s international bonds fell once more on Monday.
The 2025 bond, which is denominated in dollars, experienced the largest drops, dropping nearly 2 cents before recovering part of the losses to trade down 1.4 cents at 48.1 cents by 0900 GMT, according to Tradeweb data.
The central bank’s foreign exchange holdings have decreased to $2.9 billion, just enough to pay imports for three weeks. Resuming the IMF program will also open up new finance options for Pakistan.
If a deal could be achieved, it would still require approval from the IMF board.
What has Pakistan and the IMF agreed to?
Ishaq Dar, the minister of finance, stated on Friday that the nation and the IMF had reached an agreement on the terms for the release of $1.1 billion in essential funds, adding that the payment was delayed due to “regular procedures.”
The following are the main items that the Pakistani government claims it has previously agreed upon with the IMF:
To obtain Rs170 billion in revenue, the government would enact fiscal policies, including taxation.
The administration will carry out its current obligations to raise petroleum levies. On March 1 and April 1, diesel taxation will increase twice, each time by 5 rupees per liter.
The country and the IMF had reached an agreement on the parameters for the release of $1.1 billion in necessary money, according to Finance Minister Ishaq Dar, who added that the payment was delayed due to “normal procedures.”
The primary points that the Pakistani government believes it previously agreed upon with the IMF are as follows:
The government would undertake fiscal policies, including taxation, to generate Rs 170 billion in revenue.
The government will uphold its present commitments to increase fuel taxation. The tax on diesel will rise again, on March 1 and April 1, each time by 5 rupees per liter.
The Pakistani cabinet will consider and accept the IMF’s planned energy reforms. This would entail Pakistan eliminating all of its “circular debt,” a type of accumulated governmental debt brought on by subsidies and unpaid payments in the electricity industry.
It was not immediately necessary to completely eliminate circular debt. Pakistan would not add additional circular debt for gas in the interim.