ISLAMABAD: Formal talks between cash-strapped Pakistan and International Monetary Fund (IMF) for the first biannual review of a $7-billion bailout programme kicked off Tuesday in Islamabad.
Pakistan and IMF had reached a three-year $7 billion aid package deal in July, with the new programme set to allow the country to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”. As part of the deal, Islamabad had agreed to a number of unpopular measures, including increasing the amount of tax it collects from people and businesses.
A nine-member team led by IMF mission chief Nathan Porter had landed in Pakistan on Monday to assess the country’s economic performance to determine the release of a $1.1-billion tranche. “They are here. We will have two rounds of talks, first technical and then policy level. I think we are well-positioned for the talks,” finance minister Muhammad Aurangzeb said.
During their discussions with Pakistani authorities, the IMF delegation will assess the country’s compliance with quantitative performance criteria, structural benchmarks and indicative targets under the 37-month programme.
A senior govt official involved in preparations for the IMF review said there were some technical slippages for certain deadlines. The most critical weakness observed so far had been the revenue shortfall against programme targets, the official added.
The ongoing 37-month Extended Fund Facility (EFF) programme consists of six reviews over the life of the bailout, and the release of the next tranche of approximately $1bn will be contingent on the success of the performance review.
Just before the mission’s visit, IMF reiterated last week that its programme aimed to raise Pakistan’s woefully low tax-to-GDP ratio by 3%, while improving the fairness and efficiency of the tax system by broadening the tax base and improving tax compliance.
According to media reports, IMF has been demanding action against tax evasion in the real estate sector. “During the ongoing talks, the IMF pushed for action against those misdeclaring property values,” a local TV station reported, saying the government had assured the global lender it would activate the Real Estate Regulatory Authority.
Pakistan has taken more than 20 loans from the IMF since 1958 and is currently its fifth-largest debtor. For decades, the country has relied on IMF loans to meet its needs and continued to struggle after years of financial mismanagement.
In 2023, Pakistan was on the verge of defaulting on its debts and had barely enough in foreign currencies to pay for a month of imports.