ISLAMABAD: MEFP of the IMF states that Pakistan will not provide any additional subsidy. Without IMF approval as both sides struggle to reach a fiscal adjustment agreement.
Pakistan and the IMF have been negotiating since late January to release $1.1 billion to the Pakistan.
Prime Minister Shehbaz Sharif’s March plan to charge affluent consumers more for fuel to subsidise inflation-hit poor consumers has hit a snag.
The coalition government is struggling to convince the lender to release the tranche despite meeting almost all Fund conditions.
The federal government also requested US intervention a day earlier to persuade the IMF staff to reach a staff-level agreement.
“Pakistan and the IMF have evolved broader consensus that Islamabad will not provide any additional subsidy. Without prior approval of the Fund staff during the remaining period of the ongoing EFF programme”. Top sources told.
Thus, the cross-fuel subsidy controversy, which delayed signing the staff-level agreement, mostly resolved.
The Kingdom of Saudi Arabia (KSA) and United Arab Emirates (UAE) had confirmed to the IMF over $2 billion and $1 billion, respectively, to cover the $5 billion external financing gap by June 2023.
The KSA and UAE formal agreements expected soon.
The Pakistani government is upset that the IMF took prior actions before signing the staff-level agreement, which never happened before.
The Fund needs commercial banks’ approval before signing the agreement, while the banks want IMF board approval and the revival of the Fund’s $2-3 billion loan refinancing programme.
