In order to get a staff-level agreement, the International Monetary Fund (IMF) has requested Pakistan to modify the financial framework for 2023–2024 before it is approved by the parliament.
The staff-level deal with the IMF cannot be accomplished without budget modifications, the international lender added.
In a last-ditch effort, Pakistan and the IMF are working to develop a more comprehensive financial framework agreement that, if reached, might open the door for the budget for 2023–24 to be approved with adjustments, including raising the FBR’s tax collection target and reducing spending.
Pakistan and IMF on Current Budget Talks
“The Pakistani side shared the revised budgetary estimates for the next fiscal year with the IMF, but so far a broader agreement is yet to be achieved,” said a top official who is aware of the ongoing discussions between Pakistan and the IMF, which were virtually held from Islamabad and Washington on Friday.
The Minister of Finance’s closing remarks were postponed because of this; initially, Friday was supposed to be the day. Currently, it could be finished on Saturday (today) or Monday.
Pakistan and the IMF held two rounds of virtual negotiations in the past 24 hours following Prime Minister Shehbaz Sharif’s meeting with the IMF’s MD in Paris in an effort to advance towards a staff-level agreement.
Although the Pakistani authorities provided updated budgetary estimates for the upcoming fiscal year to the IMF review mission in an effort to forge a wider consensus on the budgetary framework, it is still unclear to what extent they will be able to put aside their differences and reach an understanding on the most contentious issues.
Ishaq Dar, the minister of finance, was scheduled to deliver his closing remarks to the National Assembly today (Saturday), but there was a potential that it might not happen until Monday because the Finance Bill for 2023–24 hadn’t been finalized.
“In the last two rounds of virtual talks held on Thursday and Friday nights, Pakistan and the IMF held hours-long discussion in which Islamabad presented a revised budgetary framework to the IMF. But so far, a broader agreement could not be achieved till mid-night Friday,” top official sources told the news agency.
Positive outcomes from the negotiations could lead to both parties moving closer to a deal. On June 30, 2023, the current IMF plan funded by the $6.7 billion Extended Fund Facility (EFF) would come to an end.
The budgetary framework for its inability to increase the tax base, getting rid of tax expenditures, offering a tax amnesty program, the external funding deficit, and market-based exchange rate were the three main unresolved difficulties mentioned by the IMF.
In terms of the fiscal framework, the government will need to increase the FBR’s tax collection objective, rationalize the target for non-tax revenue, and cut spending in order to reach a primary surplus.
When reached, a representative stated that there had been intense efforts in the previous day with the hope of a successful outcome.
However, he noted that it would be premature to draw any conclusions just yet and that there was no luxury of extra time, meaning that the negotiations would soon be coming to a close.
At the time this story was filed, the most recent round of negotiations went until after midnight. Top authorities responded to inquiries from this reporter by stating that discussions continued until 12.40 a.m. on Saturday.
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