Pakistan, IMF likely to conclude talks today

Pakistan, IMF likely to conclude talks today

ISLAMABAD: Pakistan and the IMF have nearly completed their negotiations by agreeing on all terms and conditions for providing 300 percent quota equivalent to $5.3 billion bailout package to cash-starved Islamabad under a 36-month Extended Fund Facility (EFF).

As the IMF staff based in Washington DC is going to enjoy an extended weekend from Thursday (July 4) because of the independence day of USA, Pakistan and the IMF will finalise the remaining work such as time schedule for signing the Letter of Intent (LoI), preparing staff report and presenting Pakistan’s case before its Executive Board around August 1, 2013 or one month later in September.

This time schedule is important because the executive directors of IMF will be on a month’s leave from August 1, 2013 and in normal situation the executive board does not meet for approving routine loans except in case of an emergency.

The IMF’s mission chief has recently given de-briefing to all multilateral and bilateral donors based in Islamabad and apprised them about the progress made so far in the ongoing talks with Pakistan.

The EFF facility will be back-loaded instead of front loaded as in case of the last Standby Arrangement Program (SBA) of 23 months. Among the major conditions, there will be some prior actions including putting in place a mechanism to ensure revenue surplus of all provinces instead of deficit.

The NFC implementation committee under the chairmanship of finance minister can devise a mechanism to generate revenue surplus. All the provinces have presented deficit budgets except KPK.

Sindh posted a deficit budget of Rs21.6 billion, Balochistan Rs8.5 billion and the Punjab Rs34 billion instead of showing revenue surplus of Rs23 billion as envisaged in the federal government for fiscal year 2013-14.When journalists enquired about the fate of the next bailout package, the IMF’s mission chief Jeffry Franks said “we will brief you when the talks conclude”.

The Ministry of Finance issued a press statement in which it was claimed that the ongoing talks with the IMF were likely to be completed by Wednesday evening. But later on, another press statement was issued saying the talks would be concluded on Thursday (today).

There was tension between the administrative staff and journalists on Wednesday, as media persons were asked to leave the premises of Q Block and their vehicles were denied entry into the Pak Secretariat.

On other hand, the ministry high-ups say speculations have played havoc with the currency market as rupee witnessed depreciation against dollar.The spokesman of ministry of finance has expressed surprise over speculations regarding progress in talks between Pakistan and IMF leading to volatility in the market.

The spokesman said that the talks with the visiting IMF delegation are progressing well and are likely to conclude tomorrow. He said the government’s approach is based on national interests and in line with its objective of strengthening the national economy.

The spokesman hoped for successful conclusion of talks.When a country faces serious medium-term balance of payments problems because of structural weaknesses that require time to address, the IMF can assist with the adjustment process under an Extended Fund Facility (EFF).

Compared to assistance provided under the Stand-by Arrangement, assistance under an extended arrangement features longer programme engagement – to help countries implement medium-term structural reforms – and a longer repayment period.

There is also a longer repayment period of between 4 and half year to 10 years, with repayments in 12 equal semi-annual installments. In contrast, the SBA is of shorter duration, with a repayment period of 3 to 5 years.

Borrowing under the EFF is subject to the normal limit of up to 200 percent of a country’s IMF quota annually and a cumulative limit over the life of the programme of 600 percent of quota, net of scheduled repayment.