By Mehtab Haider
Published in The News on March 17, 2024
ISLAMABAD: Pakistan has decided to make a formal request to the IMF for securing a longer and larger size of fresh bailout package under the Extended Fund Facility (EFF) on the occasion of upcoming spring meetings of IMF/World Bank, scheduled to be held in Washington, DC, next month.
The annual spring meetings of Breton Wood Institutions, known as the IMF/World Bank, is scheduled to be held from April 15 to 20 in Washington, DC, and Pakistan’s delegation, led by Minister for Finance Muhammad Aurangzeb along with official entourage comprising Secretary Finance Imdadullah Bosal, Secretary EAD Kazim Niaz and Governor State Bank Jamil Ahmed, would participate in it.
It is expected that Pakistan would make a formal request to the IMF for granting a fresh bailout package of over $8 billion with the possibility of augmentation through climate finance.
There are two main possibilities for longer and larger size of the EFF programme as Pakistan may request the IMF for enhanced quota as was done back in 2008, when Islamabad had secured 700 per cent of its quota during the tenure of PPP-led regime. The other possibility is to augment the EFF through climate finance instrument for which Pakistan qualifies after witnessing the worst effect of climate degradation in recent years.
There might be a possibility of combing both of the options, keeping in view requirement of longer and larger programme size by Pakistani side as the quota might be enhanced and augmented through climate finance. This scribe sent out questions to the finance ministry spokesperson but got no reply till the filing of the report.
Sources said the IMF’s review mission is currently visiting Islamabad for completion of the second review under $3 billion Standby Arrangement (SBA) programme and release of third and last tranche of $1.1 billion. But there are no discussions in detail about the upcoming EFF programme. The current visit of the IMF mission is only meant for accomplishing the pending review and if both sides strike a staff-level agreement, then the Fund’s Executive Board is expected to grant its assent for the release of last tranche of $1.1 billion under the SBA till April 12, 2024. “Keeping in view the limited timeframe, the IMF mission has kept its parleys period shorter and would hold talks from March 14 to 18 so that they can prepare the draft Memorandum of Economic and Financial Policies (MEFP) within the limited timeframe,” top official sources confirmed while talking to The News here on Saturday.
The Pakistani side might prefer to inform the IMF team verbally about their wish to go for another bailout package, but the IMF team kept discussions focused only on the ongoing SBA programme.
Some independent economists also warned that there might be similarity in the IMF programme in case of Pakistan and Egypt as the latter’s funding was augmented to $8 billion recently with stringent conditions whereby the policy rate was hiked by 600 basis points in addition to 200 per cent hike recently and expected devaluation of 30 per cent.
With regard to augmenting the EFF, Pakistan is exploring the possibility of requesting the IMF for Resilience and Sustainability Facility (RSF), which provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness.
It will provide longer-term financing to strengthen economic resilience and sustainability by (i) supporting policy reforms that reduce macro-critical risks associated with climate change and pandemic preparedness, and (ii) augmenting policy space and financial buffers to mitigate the risks arising from such longer-term structural challenges.
