Pakistan Strategy_IMF_Pakistan out of the woods yet (AKD Daily, Feb 10, 2023)
AKD Daily
Pakistan Strategy: IMF: Pakistan out of the woods yet
- Pakistan has received the MEFP from the IMF, which should ideally pave the way for a staff level agreement and a consequent disbursement of US$1.2bn for the country.
- This would unlock external flows from multilateral and bilateral sources, at a time when the country is in dire need of US$ liquidity.
- That said, as per the IMF press release, while a broader policy framework has been agreed upon, virtual discussions will continue in the coming days to finalize the implementation details of these policies.
- Judging by the language used in the IMF’s official press release, it is our view that the program is likely to be front-loaded before the disbursement under the 9th review can materialize.
- As a part of the recent negotiations, additional taxation measures of PkR170bn are to be introduced, in contrast to the earlier anticipated PkR200-300bn.
- The IMF’s demands include the curtailment of circular debt buildup, through the implementation of gas and electricity tariff revisions. However, the clearance of the circular debt stock has not been committed as a part of the IMF program, while remaining a key issue for the government.
- Keeping in view the demands from the IMF that the 9th review is predicated on, elevated inflation figures are a possibility in the near future. Increase in gas and electricity tariffs could lead to inflation readings north of 30% as soon as Mar’22.
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