The International Monetary Fund (IMF) on Tuesday constrained the approval of the $1.2 billion tranche of loans in the latter part of August by requiring Pakistan to quickly secure ‘adequate assurances’ from the countries of friendship in order to cover the funding gaps, which could expose Islamabad to demands from its creditors in the bilateral relationship.
In a short statement, the Resident representative of IMF, Esther Perez, declared that “with the rise of PDL (Petroleum Development Levy) on July 31, the final prior decision for the combination of 7th and 8th reviews has been completed”.
The merger will open the way to release a $1.2 billion of tranches, against the original timeline of $2 billion.
However, Esther did not provide an official date for the board meeting due to the fact that the IMF believes is a gap Pakistan’s external financing requirements.
“The next board’s meeting will be scheduled for the end of August, once the financial assurances that are needed are met,” Esther Perez said.
The IMF released the statement just two weeks after Pakistan’s Ministry of Finance and the State Bank of Pakistan had declared that they had met the requirements for financing in the current fiscal year.
The Chief of the Army Staff General Qamar Javed Bajwa has appealed to the US to assist Islamabad achieve an earlier distribution in the amount of $1.2 billion. It was reported that the Foreign Office on Friday confirmed that there had been contact with the General Qamar Javed Bajwa as well as US Secretary of State Deputy Wendy Sherman.
The contacts have not also helped Pakistan in securing an earlier set date for a board meeting. Islamabad must convince the three major bilateral creditors to directly inform the IMF that they will be willing to contribute the amount of $4 billion in financing.
While the IMF has not made public the size of the funding gap the Finance Minister Miftah Ismail had said last month that the gap was $4 billion, compared to the estimated requirements for financing of more than $35 billion.
But, Miftah Ismail said on Tuesday that “there isn’t any financial gap and the 4 billion could result in an increase of the reserves of foreign currency by over $6 billion the current budget year”.
The minister also presented an idea of how to arrange the funds coming in Saudi Arabia, the United Arab Emirates and Qatar in the form of gas and oil delayed payments, selling state shares and assets of listed companies, and borrowing against the quotas from Saudi Arabia.
At this point, no significant advancement has been made, which has prevented the IMF from formally announcing its September 24th board meeting time.
Hamad Obaid Ibrahim Salim Al-Zaabi ambassador of the UAE has called Miftah Ismail on Tuesday.
“The finance minister informed the UAE’s ambassador of the possible investment opportunities in which the UAE can invest . He also assured the ambassador of the UAE of more facilitation and assistance,” according to a statement issued from the Ministry of Finance.
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The ambassador of the UAE expressed a an interest in improving and advancing the bilateral relationship between the two countries particularly on the economic front the report added.
Pakistan is seeking to negotiate between $2 billion and $2.5 billion in the UAE through the auction of two LNG-fired power stations and transferring stakes from its blue-chip businesses.
On Sunday on Sunday, the Ministry of Finance and the SBP in joint statement stated that the current fiscal year’s finance requirements stem from an account deficit in the current market of about $10 billion and principal repayments on foreign debt in the region of $24 billion. To strengthen the reserves of foreign currency in Pakistan It is crucial to ensure that Pakistan to remain slightly under-financed relative to these requirements, the statement said.
“As the result, an additional buffer of 4 billion has been planned in the coming 12 months. This financing commitment is made through various channels, including friends of Pakistan that assisted Pakistan in the same way in the initial phase in the IMF programme in the month of June of this year” according to the joint declaration.
The economic downturn has caused the rupee to lose its value by 30% , or $ 54 since Shehbaz Sharif became the president in April. This has also exposed the lack of knowledge and inexperience of this administration. Sharif administration.
The Finance Minister stated that the IMF has set the initial conditions for the approval of the budget, including a memorandum agreement with the provinces to generate cash surpluses, increasing the rates of petroleum levy as well as increasing the price of electricity in July, August , and October, and increasing the interest rate. The Finance Minister said that the conditions were fulfilled.
As well as the Ministry of Finance and the SBP were hoping that the previous steps to conclude the review were met in the review “the official Board meeting to distribute this tranche $1.2 billion is expected to take place in just a few weeks”.
The IMF statement refutes this idea of holding the board meeting within two weeks.
Despite a delay in the revival of the program and a delay in the revival of the programme, the federal government is hoping there is a relief in the rupee’s value has eased following a nearly 38% decrease in the import bill in July compared to the month preceding. The report also noted that foreign exchange exchange payments for July were considerably smaller than the June. The total payments were $6.1 billion during July, as compared the $7.9 billion for June. the report added.
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