Miftah; Pakistan and IMF near services-level agreement

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ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are set to reach a staff-level agreement to revive the stalled Extended Financing Facility (EFF) program with an increased size of $7 billion.

A government official familiar with the matter said on Wednesday that Pakistan had reached a service-level agreement with the IMF to resume its lending program. A disbursement of $1.2 billion is expected in August following final approval by IMF management, the official said, asking not to be identified until an official announcement.

The Fund’s staff is now expected to issue an official statement on the conclusion of the agreement with the Pakistani authorities shortly.

The gas rate hike, which had already been approved by the Cabinet’s Economic Coordinating Committee (ECC), would be notified at any time as the set 40-day period for issuing the revised notification was likely approaching Wednesday evening after the promulgation of the OGRA. amended law.

Amid jittery market reactions where the Pakistani bond yield hit the highest bond market-ever peak of 40.1% as the Eurobond floated at 5.58%, which was now to come maturing on December 5, 2022.

The exchange rate depreciated further and broke through Rs210 against the US dollar. The treasury bill auction saw the 3-month, 6-month and 12-month rates settle at 15.48%, 15.71% and 15.86%, respectively.

Bearing in mind all the bad news, it bodes well for the country’s economy that Islamabad has come closer to completing the staff level deal with the IMF. “Our talks with the IMF ended last Monday evening and Islamabad is now expecting the IMF’s final statement shortly,” a senior finance ministry official confirmed to The News on Wednesday.

Earlier, Finance Minister Miftah Ismail told The News that the IMF deal would be done soon. “We have agreed on a deal, and the IMF is just waiting for their internal approvals,” he added. The staff level agreement would not be signed until Pakistan sent its agreement on the Memorandum of Financial and Economic Policies (MEFP).

After the conclusion of the personnel level agreement, a Letter of Intent (LoI) would be duly signed by Finance Minister Miftah Ismail and Acting Governor SBP. It would be sent to the Fund’s Board, which would meet in August to approve two reviews, combine the 7th and 8th reviews and release a tranche of about $1.2 billion for the Pakistani economy.

Meanwhile, the government is expected to notify an increase in electricity and gas prices as the Cabinet ECC had already given its approval, but the government had not notified the revised higher utility tariffs from energy.

Regulators in the electricity and gas sectors have already achieved tariff-related atomicity as the government amended the NEPRA and OGRA laws and empowered them. If the government does not notify the determined tariff within 30 and 40 days, respectively, the determined tariff will be notified automatically after the expiration of a defined period. Regarding the electricity tariff, the government may approach NEPRA for review, but the sources indicated that the government has approached the regulator for a unified tariff in the distribution companies.

Pakistan had requested the IMF to increase the size of the EFF from $6 billion to $8 billion and extend the deadline from September 2022 to June 2023. Now the IMF has agreed to increase the size of the EFF program by $1 billion, raising it from $6. at $7 billion.

The Pakistani authorities are confident that the revival of the IMF program will pave the way for the provision of multi-billion dollar support from multilateral and bilateral creditors, so that the clouds of default hanging over the economic horizon of the country will begin to recede with the revival of the IMF program.

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