ISLAMABAD: The government has not yet withdrawn the proposed cross-fuel subsidy scheme in writing to the IMF, giving the fund another excuse for putting up a stumbling block in the way of a staff-level agreement (SLA).
Top official sources confirmed to The News on Wednesday that Pakistan has secured confirmation on additional external financing of $3 billion from the Kingdom of Saudi Arabia and the United Arab Emirates. In this regard, a formal agreement with the KSA was expected to be signed very soon. However, the IMF has not been satisfied because it was their assessment that the government would have to manage external financing of $5 billion in order to meet the requirements till the end of June 2023.
“In the context of deteriorated credit ratings and hike in interest rates done by Federal Reserves, the IMF considered that it would be hard for Islamabad to secure more foreign loans in order to manage its vulnerable external position,” said a top official and added that frustration among the dwellers of Q Block (Ministry of Finance) at Pak Secretariat was increasing. The officials are convinced that the IMF should have done the Staff Level Agreement a long time ago. They suspect the IMF delay is a political game being played with Pakistan and its people.
One official argued that Pakistani authorities were exploring options to secure another $1 or $2 billion from one of the bilateral friends to meet another condition of the IMF but authorities were reluctant to share the name at this stage. It might be China or any other Muslim state that can come forward to unlock the outstanding deal with Pakistan.
When inquired whether the IMF asked for the withdrawal of cross-fuel subsidy in writing, a top official of the Finance Ministry denied it.
To another query, he said that a formal agreement on additional $2 billion deposits from the KSA would be signed “very soon”.
The official sources said that the World Bank had not yet granted its confirmation on the RISE loan programme along with co-financing of AIIB to the tune of $900 million.
Pakistani authorities argued that it would be materialised soon as the government had moved towards harmonization of GST on services in all the four provinces.
Another stumbling block in the way of signing the SLA would be the requirement of Rs21 billion for holding elections in Punjab as ordered by the Supreme Court of Pakistan. Although, the Ministry of Finance was non-committal for the provision of additional funds, all developments occurring at the judicial level are giving confusing signals to the IMF. Last, but not the least, the timeframe of the existing IMF programme is another bone of contention which needs to be resolved for moving forward. It is going to expire on June 30, 2023 but the ongoing 9th Review has not yet been accomplished. The 10th Review had become due on February 3, 2023, while the last and final 11th review would become due on May 3, 2023 i.e. in one week.
No one knows how both sides will proceed further as the 9th Review could not be concluded despite meeting all major conditions.