Pakistan Still Negotiating But Expects IMF Deal in Few Days

Pakistan is still resolving differences with the International Monetary Fund to resume its $6.5 billion loan program but expects to reach an agreement in the next few days.

(Bloomberg) — Pakistan is still resolving differences with the International Monetary Fund to resume its $6.5 billion loan program but expects to reach an agreement in the next few days.

Most of the issues have been sorted out now, Finance Secretary Hamed Yaqoob Sheikh said in Islamabad. Pakistan sees an agreement in a few days and plans to complete its program that ends in June, said Finance Minister Ishaq Dar. The nation has failed to meet multiple such deadlines in the past.

The South Asian nation is relying on funds from the multilateral lender to avoid a loan default and revive its $350 billion economy. The funds will be crucial to ease widespread shortages, curb record prices and bolster foreign-currency reserves that have fallen to less than a month’s worth of imports.

To win the lenders support, Pakistan has increased taxes, raised energy prices and increased interest rates to 20%, the highest in 25 years. The nation also allowed its currency to depreciate making it among the worst performers globally.

Pakistan has seen a serious trust deficit emerge with the IMF after previous authorities reversed agreed terms, Dar said at an event in Islamabad. IMF also wants some assurances related to steps for next financial year starting July, said Sheikh.

Amid a dollar crunch, investors have raised concerns on the nation’s ability to make good on its payment obligations. The nation needs to repay about $3 billion dues in upcoming payments until June, while $4 billion is expected to be rolled-over, central bank Governor Jameel Ahmad said. Last week, Moody’s Investors Service downgraded the nation deeper into junk citing fragile external position.

The nation has seen differences over revenue and expenditure forecast, said Sheikh. Among pending issues, authorities have mentioned electricity prices for next fiscal year and a possible revision in the dollar reserves target for the quarter ending March.

–With assistance from Ismail Dilawar.

(Updates with comments from finance secretary throughout.)

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