Pakistan needs to give assurances in advance that its balance of payments deficit is fully financed for the remainder of its bailout program with the International Monetary Fund (IMF).
The lender’s Resident Representative Esther Perez Ruiz told Reuters on Monday that external financing is one of the final steps the lender wants Pakistan to take before clearing funding that has been stalled since late last year.
Ruiz said, “All IMF program reviews require firm and credible assurances that there is sufficient financing to ensure that the borrowing member’s balance of payments is fully financed … over the remainder of the program. Pakistan is no exception”.
She also mentioned Pakistan was committed to aligning its official and informal foreign exchange market rates, just days after the rupee collapsed to new lows. Ruiz added that one of the measures planned by Pakistani authorities to address energy sector debt is a permanent power surcharge on consumers.
Ruiz’s remarks come after last week when Finance Minister Ishaq Dar said the IMF wasn’t asking for any assurances of external financing for bailout approval. He said at the time that Pakistan required $5 billion in external financing to cover its balance of payments deficit in the fiscal year ending June 30, adding that the IMF believed it should be $7 billion.
After more than a month of negotiations to settle policy framework issues aimed at reducing the fiscal deficit ahead of the annual budget in June, Pakistan hopes to sign a staff-level agreement with the IMF.
Except for the external financing requirement, Pakistan has completed almost all of the prior actions. If everything proceeds on schedule, the current program will successfully conclude in June.