Negotiations to reach a staff-level agreement on the ninth review of the $7 billion Extended Fund Facility (EFF) have started between Pakistan and the International Monetary Fund (IMF) on Tuesday.
As the cash-strapped government launches new efforts to conclude the lingering ninth review, Finance Minister Ishaq Dar is leading the Pakistani side and Nathen Porter is in charge of the IMF review team. The review team from the IMF arrived in Islamabad on Monday.
Pakistan is likely to discuss its strategy for implementing further revenue measures with the visiting review delegation.
The Fund has refused to compromise on the terms it outlined for the restoration of the lending facility, causing analysts to label the technical level negotiations as “toughest.”
According to The News, Pakistan is experiencing a severe economic crisis, with the currency falling, inflation skyrocketing, and a shortage of electricity. Because he was worried about backlash before the upcoming elections in October, Prime Minister Shehbaz Sharif resisted the IMF’s demands for tax increases and subsidy reductions for months.
However, Islamabad has begun to yield to pressure in recent days as the threat of national insolvency grows and no friendly nations are ready to give less severe bailouts.
To manage a growing illicit market in US dollars, the government relaxed limitations on the rupee, which led to the currency falling to historic lows. Additionally, artificially low petrol costs have increased.
“We’re at the end of the road. The government has to make the political case to the public for meeting these (IMF) demands,” former World Bank economist Abid Hasan told AFP.
“If they don’t, the country will certainly default and we’ll end up like Sri Lanka, which will be even worse.”
Last year, Sri Lanka entered into debt default and experienced months of food and fuel shortages that led to unrest and finally forced the nation’s government to depart the country.
