Pakistan has to give assurances on financing balance of payments deficit: IMF

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Pakistan will be required to give an assurance that its balance of payments deficit is fully financed for the remaining period of an International Monetary Fund (IMF) programme, the lender’s resident representative said.

The external financing is one of the last in a string of prior actions the lender wants Islamabad to complete before it clears funding stalled since late last year, Esther Perez Ruiz told Reuters in an e-mailed response on Monday.

The government hopes to sign a staff-level agreement with the IMF after over a month of negotiations to settle policy framework issues aimed at curtailing the fiscal deficit ahead of the annual budget around June.

Pakistan has completed almost all of the prior actions except for the external financing requirement the IMF wanted it to for clearing $1.1 billion in disbursements under the $6.5bn Extended Fund Facility agreed in 2019. The programme ends in June.

“All IMF programme reviews require firm and credible assurances that there is sufficient financing to ensure that the borrowing member’s balance of payments is fully financed … over the remainder of the programme. Pakistan is no exception,” IMF’s Ruiz said.

Finance Minister Ishaq Dar said last week that the external financing assurance was not one of the IMF’s conditions for clearance of the funding.

He said Pakistan needed $5bn external financing for the balance of payments deficit in the fiscal year ending June 30, adding the IMF believed it should be $7bn.

The IMF representative also said that Pakistan was committed to aligning its official and informal foreign exchange market rates, days after the rupee plunged dramatically.

A permanent power surcharge on consumers was also among measures planned by the government to address energy sector debt, she said.