The International Monetary Fund (IMF) has made it clear to Pakistan that it will not provide any additional subsidies without its prior approval. The lender has included in the draft Memorandum of Economic and Financial Policies (MEFP) that Islamabad will not offer more subsidies unless the Fund approves them, reported a national daily. Also, the federal government has approached the United States to expedite a staff-level agreement (SLA) with the IMF which is in limbo despite Islamabad fulfilling relevant pre-conditions for the bailout revival.
The report said Pakistan and the IMF have reached a broad agreement that Islamabad will not provide any additional subsidies without prior approval from the Fund.
Meanwhile, Saudi Arabia and the United Arab Emirates have already extended confirmation to the IMF of more than $2 billion and $1 billion, respectively, to ensure an external financing gap of $5 billion by the end of June 2023. The formal agreements are expected to be signed soon.
The IMF now requires confirmation from commercial banks before signing the SLA, while the banks request IMF board approval and the revival of the Fund’s program to re-finance $2 to $3 billion in loans. It bears mentioning that since January 2023, Pakistan and the IMF have been negotiating the SLA for releasing $1.1 billion to the cash-strapped country. Prior progress on the agreement took a hit after Prime Minister Shehbaz Sharif in March announced a fuel subsidy for low-income citizens who were struggling to make ends meet amid hefty power and commodity price hikes in the past few months.
