Pakistan expects finalisation of staff-level agreement with IMF soon

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Pakistani officials are hopeful for the finalisation of a staff-level agreement (SLA) with the IMF during Finance Minister Muhammad Aurangzeb's upcoming visit to the US, according to a media report on Friday.

The finalisation is subject to consensus on the external account and verified flood-related losses, as well as their fiscal adjustment across central and provincial accounts, the Dawn newspaper reported.

These issues are expected to be finalised during the upcoming IMF-World Bank annual meetings, where the Pakistani delegation, led by the finance minister and including the SBP governor and FBR chairman, will depart this weekend.

Official sources confirmed to the paper that the International Monetary Fund (IMF) had shared the draft Memorandum of Economic and Financial Policies (MEFP) with the authorities before a visiting mission left Pakistan after two weeks of engagements.

The IMF team visited Karachi and Islamabad from September 24 to October 8 to discuss the second review under the Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF).

We were at the cusp of finalising the SLA, but two crucial tables that form part of the MEFP required further adjustments, an official said, hoping that the latest data on foreign remittances had strengthened Pakistan's stance about the external account.

He said the State Bank of Pakistan (SBP) would hold its cautious monetary policy stance for now in light of the rebounding inflation. Moreover, the flood-related losses still need to be finalised and verified.

Officials said the IMF mission warned that timely corrective measures, including tariff adjustments, would be crucial for sustainability.

Therefore, the government will have to ensure the timely disbursement of committed subsidies, including the payment of pending bills by the provinces where consumer bills were waived or relaxed in flood-affected districts.

The provinces, with adjustments against flood losses, must also deliver their cash surplus targets. The government will maintain a tight fiscal policy, particularly regarding the disbursement of development funds, while development projects in flood-affected regions will remain on hold.

In an end-of-mission statement on Thursday, the IMF said that significant progress had been made towards finalising the SLA on the second review under the 37-month EFF and the first review of the 28-month RSF.

Pakistan anticipates receiving around USD 1.2 billion as a combined tranche from the two IMF facilities next month, subject to board approval, based on the expected SLA outcome from policy-level discussions next week.

Programme implementation remains strong, broadly aligned with the authorities' commitments, the IMF noted.

The team added that significant progress was made in several key areas.

The IMF team and the authorities will continue policy discussions with a view to settling any outstanding issues, it said, adding that the team expressed sympathy for those affected by the recent floods.