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Pakistan is gearing up for crucial negotiations regarding the next installment of the $710 million loan, which is part of the $3 billion standby arrangement between the government of Pakistan and the International Monetary Fund (IMF). These negotiations are scheduled to take place on November 2, in Islamabad.
The IMF delegation will be led by Nathan Porter, and the government of Pakistan is expressing optimism about the outcome of the negotiations, despite the challenges posed by the external sector.
Esther Peers, the IMF representative in Pakistan, shared that the IMF initially suggested a date around November 7 for the negotiations. However, Pakistan stated that it has already gathered the necessary data required for the talks. In the event of a successful negotiation, the IMF’s board is expected to approve the next installment of the loan in December.
One of the primary concerns in these negotiations will be the discrepancy in external financing. The Pakistani government, accounting for Eurobonds and commercial loans, has estimated an external financing shortfall of approximately $4.5 billion. However, some experts believe this figure may be conservative. Additionally, the exchange rate of the Pakistani rupee against the U.S. dollar and monetary policy will also feature prominently in the discussions.
The value of the Pakistani rupee, which had been relatively stable for a month, has started to experience depreciation in recent days. This development is expected to be a key point of discussion. According to a federal minister, the condition to reduce the circular debt of the Power Division has already been met.
Furthermore, it’s worth noting that the IMF had previously imposed a condition to end subsidies on oil. Despite this condition, the Pakistani government has continued to offer cross-subsidies to domestic, export, and industrial gas consumers, and this approach appears to be showing promise in meeting the IMF’s requirements.
The outcome of the November 2 negotiations will hold significant implications for Pakistan’s economic stability and fiscal policies. Stakeholders are closely monitoring the developments and are awaiting further updates on the negotiations.
