Staff-level agreement delayed amid Middle East crisis, negotiations to continue: IMF

ISLAMABAD: The International Monetary Fund (IMF) on Thursday confirmed that its mission could not reach a staff level agreement (SLA) on the third review of the country’s $7 billion Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF) despite considerable progress, and that negotiations would continue.

In its ‘end of mission statement’, the IMF said its team, headed by Iva Petrova, held discussions with Pakistani authorities on the third review under the Extended Fund Facility (EFF) and the second review of the 28-month arrangement under the Resilience and Sustainability Facility (RSF) in Karachi and Islamabad, as well as virtually, from February 25 to March 11 (Wednesday).

“While considerable progress was made in the discussions, these will continue in the coming days, including to more fully assess the impact of recent global developments on Pakistan’s economy and the EFF-supported programme,” Petrova said.

It said that programme implementation under the EFF remained broadly aligned with the authorities’ commitments through the end of February.

“Considerable progress was made in the discussions on policies ahead, including on sustaining the fiscal consolidation to strengthen public finances; maintaining a sufficiently tight monetary policy to ensure inflation remains durably within the State Bank of Pakistan’s target range; and advancing reforms to improve the viability of the energy sector,” it said.

“Particular attention was paid to deepening structural reforms, given the authorities’ emphasis on accelerating growth, alongside efforts to strengthen social protection and rebuild health and education spending. These discussions are ongoing.”

The IMF statement added that the Pakistani authorities had also made “good progress” in implementing their reform agenda to strengthen climate resilience, including through the completion of reform measures under the RSF.

“Discussions also covered the impact of the conflict in the Middle East on Pakistan’s economic outlook, the balance of payments and external financing needs amid volatile and rising energy prices and tighter global financial conditions,” the statement said.

“The IMF team and the authorities will continue these discussions with a view to conclude them in the coming days.”

The IMF review mission has been in talks with Pakistani authorities since Feb 25 for the third review of the EFF programme and the second review of the RSF facility. Discussions moved online on March 3 following the US-Israel attacks on Iran and were originally scheduled to conclude on March 11.

Upon successful completion of the review, Pakistan would become eligible to receive about $1bn (760 million Special Drawing Rights) under the EFF and around $200m under the RSF by the end of April.