ISLAMABAD: Pakistan has promised the International Monetary Fund (IMF) that it will increase its policy rate by 2% to meet the lender’s requirements for reviving the loan programme.
According to people familiar with the situation, virtual conversations with the IMF proceeded late into the night, and officials from the international lender were “painstakingly reviewing” every detail.
According to the reports, “Pakistan has agreed to raise its policy rate by 2%,” which is now 17%.
After the settlement, a staff-level agreement will be signed, according to the sources.
The power industry has been one of the most significant stumbling blocks between Pakistan and the IMF so far.
According to the sources, Pakistan has also briefed the lender on its external financing until June, and the IMF is also holding assurance talks with these countries.
No talk is taking place addressing the political situation in Pakistan, sources stated.
Pakistan-IMF Negotiations
Since early February, Pakistani officials have been negotiating with the IMF over policy framework issues with the hope of signing a staff-level agreement (SLA) that will clear the way for additional inflows from other bilateral and multilateral lenders.
The lender will release a tranche of more than $1 billion from the $6.5 billion rescue agreement reached in 2019.
Pakistan has already taken a number of steps, including the adoption of a market-based exchange rate, an increase in fuel and power rates, the elimination of subsidies, and an increase in taxation, in order to generate income to close the budget deficit.
Inflation, which stood at 27.50% in January, is projected to increase as a result of the stringent measures.
The South Asian nation’s economy has been in turmoil, and its foreign exchange reserves have plummeted to roughly $3 billion, just enough to cover three weeks’ worth of imports.
Difficult Situations
A day ago, Prime Minister Shehbaz Sharif stated that Pakistan must reluctantly accept the stringent conditions in order to provide a lifeline for its ailing economy. In a live-broadcast meeting at his office in Islamabad, he addressed top security personnel.
“We have to accept unwillingly the strict conditions for the IMF deal,” he added, adding that an agreement was still “week, 10 days” away.
According to Pakistan’s finance minister, China’s refinancing of $700 million was revealed this week by its longtime ally.
Friday, Finance Minister Ishaq Dar announced that the money has been received by Pakistan’s central bank.
He stated in a tweet, “Thank God,”
