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It has been more than four weeks since the IMF staff concluded its technical talks for the pending 9th review. Yet, the staff level agreement (SLA) is yet to be reached. The markets are anxious because of the delay. First, the technical talks that were earlier delayed by over three months, were supposed to start in October 2022, were finally concluded in the second week of February 2023, and now it is mid-March, and yet there is no SLA.

The economy has been on a kind of ventilator since then. Imports are being restricted to manage the meager level of SBP reserves with the threat of economic default looming. One by one, industries are shutting down or winding back operations as they cannot import raw materials. In the process, unemployment is on the rise and growth is on a decline while there is no respite from inflation which is setting all-time records.

The question is whether the Fund believes any of the key pieces of the puzzle to be still missing. Three elements are pending, and there is a good chance that these shall be resolved soon, and the SLA shall happen in this week only. First, the Fund needs verification whether the exchange rate is market based or not. The second is the cabinet approval for the revision of power tariff, and the third and the most critical element is verification of the financing assurances provided by the SBP from bilateral partner countries. If pieces fall into place which is likely, the SLA shall happen as well. And then those financing must be in SBP account before the board meeting. Earliest, it can happen in May.

The issue with the currency is very important for the Fund. Since the imports are restricted, fundamentally the currency is not market based. In fact, SBP is buying dollars from the market; but the catch is in micromanagement of imports. It is very hard for the IMF to assess the implied intervention; one gauge that talks about the market value is the rate in the open market. The gap between the interbank and open market must be zeroed in. And SBP must announce a clear plan to open-up imports.

On the gross financing, there is a gap of two billion dollars on the current account deficit where the IMF is counting the backlog which the government is yet to agree with. Now, that seems to be sorted and the total financing need is $4.5 billion including that of WB and ADB. Of this, certain financing assurances have been sent by the SBP to the IMF and the Fund is seeking verification. That also leads to the SLA. The amount is perhaps $2 billion for Saudi and $1 billion for the UAE. Here, some of the confirmation has not come yet.

Moreover, the flows must be poured in before the board’s approval. This includes parts of deferred oil facility and other rollovers. Fund wants the reserves to shore up. These flows remain critical as do the other financing arrangements. Finger crossed.


Comments are closed.

MKA Mar 14, 2023 10:01am
I have a feeling that the IMF resident rep is playing dirty at the behest of certain PTI contacts. IMF board should be requested for his replacement.
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Maqbool Mar 14, 2023 11:07am
Dar has told IMF they want to give a petrol subsidy to Motorcyclist of billions , is this the right time or this he trying to get the agreement cancelled ? And It’s Ridiculous to recover this subsidy for motorcyclists from Car Owners as proposed , this should only be recovered only from our elite , so this increase must only be on High Octane fuel .
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Shiteistan Mar 14, 2023 12:52pm
De-link from proposed Russian oil purchases. Then the IMF will sign on the dotted line.
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Ishtiaq Mar 14, 2023 01:27pm
@MKA, you're right
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Rehan Saeed Mar 14, 2023 02:14pm
@Ishtiaq , I think so, you are right at that point
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bonce richard Mar 14, 2023 05:13pm
@MKA, IMF wants to increase more interest rates up to 23%. It means we are in more problems, although we devalued our currency. For our defense, we are borrowing money and paying interest. Why we are paying too much money on security to keep good relations with neighbors and forget Kashmir?
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Amin khan Mar 14, 2023 07:07pm
Actually IMF pressuring pakistan on behalf OF IMRAN KHAM
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Nauman Ashraf Mar 14, 2023 07:20pm
@Amin khan, This is ridiculous. We can not keep up with the agreements we and then find reason in thoughtless conspiracy theries.
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Ainul Haque Mar 14, 2023 08:43pm
Govt should give salaries to unemployment person from the who is responsible to this critical situation to industries are shut down and poor people are jobless. Why did change govt. the right economy policy.
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Jobless person Mar 14, 2023 08:59pm
Govt should give salaries to unemployment person from the who is responsible (politicians, generals, judges, SBP, bureaucrats) to this critical situation, industries are shut down and poor people are jobless. Why did change the right economy policy government.
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Muhammad Rashid Mar 14, 2023 09:06pm
very tough for businessman
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Aamir Latif Mar 15, 2023 12:01pm
Every day, public is given the lollipop that SLA is just around since last 2- months... But whatever is coming is till June 2023 which is just around corner, what next..???? SBP though publicize net forex but there is remittance of nearly $2bn+- every month, why it is not reflected in reserves addition...??? Further, hard ships are imposed, just reading SNGPL given sovereign guarantee on paying PSO Rs 50 billions, interest in consumer.. Every damn development or whatever is dumped on consumers, but where is govt plans to mend his own house and inefficiency and losses.. Pakistan should realistically develop its plan without IMF, whatever is the cost and resultant, it's not public by GoP must share its consequences jointly not public alone
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Zaheer Chishti Mar 15, 2023 12:16pm
The wife of PTI government finance minister is one of the members who is creating hurdles
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Imran Mar 15, 2023 05:34pm
IMF should save its valuable $$$$ and NOT give a dime to this known corrupt group of politicians in Govt. I’m glad IMF people are smart and so far have succeeded in luring the convicted rulers behind Truck ki 32.
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Jawed ali khan Mar 15, 2023 06:40pm
Dear Mr MKA , your comment about the IMF rep in pakistan only displays that you are living in fools paradise . The IMF rep is only trying to make sure that firstly pakistan treads on a path of economic stability so that repayments are facilitated and secondly , the assurances given by ishaq dar team are verified and it should not happen that the tranche is released on the basis of assurances and then there is nobody who is responsible . I think that IMF team has learnt wisely from their past mistakes of blindly believing the Pakistan govt assurances .
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Muhammad Agha Mar 16, 2023 04:36am
@MKA, you have a feeling that the IMF resident rep is playing dirty at the behest of certain PTI without any proof or concrete evidence and you bother to express it in this news paper. I think that as a good citizen of Pakistan we should try to calm down the situation and create any chaos unnecessarily.
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bonce richard Mar 16, 2023 06:08pm
@Ainul Haque, Our corrupted army change the regime, although the economy of the country going well, and the textile industries broke the previous record. If you read the history of Pakistan our army always interferes in the politics a result we lost one part in 1971, although there was a fair election and Punjabi Mafia was not like the Bengali people.
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