Pakistan said it agreed to the conditions of the IMF on the disbursement of $1.1 billion in funding

© Reuters. FILE PHOTO: Men reach out to buy bags of subsidized flour from a truck in Karachi, Pakistan January 10, 2023. REUTERS/Akhtar Soomro/File Photo

By Ariba Shahid

KARACHI (Reuters) – Pakistan has agreed with the International Monetary Fund on conditions for the disbursement of some $1.1 billion in key funding, Finance Minister Ishaq Dar said on Friday, adding that payment was delayed due to “routine procedures”.

Dar spoke to reporters hours after an IMF delegation left Islamabad after 10 days of negotiations aimed at freeing up the funds Pakistan desperately needs to sustain its economy.

Payments of the funds, part of a $6.5 billion bailout that Pakistan signed in 2019, have been stalled since last December.

“The prime minister has said we are committed,” Dar said. “We will implement whatever has been agreed between our teams.”

“We will try to ensure Pakistan completes the second IMF program in its history,” he added.

The money is needed to prevent Pakistan from defaulting on external payment obligations, analysts say, and an IMF deal would pave the way for other institutions and governments to provide capital. However, the financial adjustments required by any deal are likely to spur record-high inflation, which hit 27.5 percent year-on-year in January.

The IMF talks are scheduled to end on Thursday, but Dar said they will continue virtually on Monday, with the aim of reaching a staff-level agreement, then needing to be at the IMF’s headquarters. in Washington for approval before disbursement.

In a statement, the head of the IMF’s mission to Pakistan, Nathan Porter, confirmed negotiations were continuing, adding that significant progress had been made.

The IMF funding is crucial to the country’s $350 billion economy, which is already facing a balance of payments crisis with foreign exchange reserves dwindling to less than three weeks to meet the demand. meet import demand. Last week, Prime Minister Shahbaz Sharif called Pakistan’s economic situation “unthinkable”.

Pakistan has reverted to a market-based exchange rate and increased fuel prices, one of the conditions set by the IMF.

Asked about other measures, Mr. Dar said Pakistan would raise fuel prices in batches, would not impose sales tax on petroleum products and was considering introducing a new finance bill. He did not give more details.

Dar also said his government would discuss the fund’s recommendations on energy sector reform.

Earlier, finance ministry officials told Reuters the government and the IMF were discussing what to do with the energy sector’s nearly $15 billion debt to the government.

They said Pakistan has submitted a plan to cut debt in phases through price increases and dividends from gas companies, but the IMF is asking for a clearer roadmap.

Aside from the stalled batch, the remaining $1.4 billion of the $6.5 billion bailout program will end in June.

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