The International Monetary Fund (IMF) expects to reach an agreement with Pakistan this week on targets for the first review of a $3 billion bailout, according to IMF Managing Director Kristalina Georgieva, clearing the way for additional funding.
“I expect an agreement on the review to come within this week,” she told Bloomberg News.
IMF MD is Hopeful on Agreement With Pakistan
According to Georgieva, the primary issue for Pakistan is tax collection, with the IMF requesting that Islamabad increase tax collections to at least 15% of GDP, up from the current 12%.
An IMF mission has been in Pakistan for the last two weeks for technical and policy-level discussions to assess whether the government is on track to meet benchmarks set under a July standby arrangement.
Pakistan has already received the first $1.2 billion tranche. The IMF mission’s visit to Islamabad will come to an end on Wednesday.
$710 Million Tranche
According to a Pakistani finance ministry official, Islamabad will likely receive the next $710 million tranche, its second under the bailout arrangement, in December.
The official spoke on the condition of anonymity because he was not authorized to reveal details of the negotiations. “I think everything is on track,” he stated.
“We’re meeting all our revenue targets. Our fiscal and policy measures are in line with the review. There is largely agreement on all benchmarks.”
Government Spending To Be Reduced
However, the official added that the international lender is concerned about external funding and government spending, which it would like to see reduced.
Georgieva praised Islamabad for remaining committed to the program despite financial and political challenges.
According to finance ministry officials, Pakistan requires nearly $24 billion in external financing from now until next June.
The country of 241 million people was on the verge of default when the IMF agreed to a last-ditch nine-month bailout in July.
It faced a severe balance of payment crisis, with foreign exchange reserves reduced to just three weeks of controlled imports, as well as historically high inflation and an unprecedented currency devaluation.
To read our blog on “Pakistan and IMF policy talks went well with no new taxes,” click here.