Officials of Pakistan’s Ministry of Finance left Islamabad for Doha on Tuesday to commence talks with the International Monetary Fund (IMF) in a bid to revive a suspended bailout program that is being perceived as an essential lifeline for the country’s economy.
“[The] Finance Division’s team is leaving for consultations with the IMF Mission at Doha from tonight,” the Finance Ministry posted on Twitter on Tuesday evening. “Meetings will start from tomorrow,” it added.
According to earlier statements, the talks—a continuation of the interaction initiated by Finance Minister Miftah Ismail last month in Washington—would focus on finalizing a staff-level agreement for the immediate release of a $1 billion tranche of the suspended $6 billion Extended Fund Facility (EFF) inked between the ousted Pakistan Tehreek-e-Insaf (PTI)-led government and the global lender.
Ismail would be participating in the talks via video-link, per the Finance Ministry, which said he would travel to Doha on May 24 prior to the conclusion of the negotiations.
Key to reviving the program is whether the government can convince the IMF that it would either fulfill a requirement to end an unfunded fuel subsidy announced by former prime minister Imran Khan or fund it without triggering further deficit. While the incumbent coalition government had earlier expressed intent to wrap up the subsidy—with the finance minister describing it as a “trap” laid by the PTI prior to its ouster—Prime Minister Shehbaz Sharif has recently said that his government does not wish to place additional financial burden on citizens already dealing with rampant inflation.
However, it is unlikely that the government would be able to resist the IMF’s demands to end the subsidy and raise fuel prices, as the Oil and Gas Regulatory Authority’s data has noted that authorities would need to pay Rs. 75 billion over the next two weeks to fund it. On Tuesday night, senior leaders of the ruling coalition decided, in principle, to remain in power until August 2023, with senior officials confirming to Newsweek that this meant it would likely either end the blanket subsidy or alter it to a targeted approach that benefited only the most deserving.
Beyond the subsidy, the IMF is also expected to ask the new government to further tighten fiscal and monetary policies, including removing several tax exemptions through the next federal budget.