© Reuters. FILE PHOTO: Men reach to buy subsidized sacks of flour from a truck in Karachi, Pakistan, January 10, 2023. REUTERS/Akhtar Soomro/File Photo
Author: Ariba Shahid
KARACHI (Reuters) – Pakistan and the International Monetary Fund have agreed to continue talks on a deal, delaying the payment of $1.1 billion in funds critical to sustaining the South Asian economy.
Finance ministry and IMF officials said the talks, which began late last week and were due to end Thursday, did not result in a “committee discussion,” a meeting that would lead to the release of funds that are part of a $6.5 billion aid package that was signed by Pakistan in 2019.
The tranche was originally expected to be disbursed last December.
“Virtual discussions will continue in the coming days,” IMF chief of mission to Pakistan Nathan Porter said in a statement, adding that significant progress had been made.
Pakistan’s Finance Minister Hamed Sheikh told Reuters late Thursday that the IMF had asked for more time “for staff-level negotiations.” To release the funds, the IMF needs to reach a staff-level agreement with Pakistan, which then needs to be approved by the IMF’s head office in Washington.
The money is needed to prevent Pakistan from defaulting on foreign payments, and the agreement with the IMF opens the way for other organizations and governments to provide funds, analysts say.
However, the fiscal adjustments required by any deal are likely to fuel record high inflation, which reached 27.5% year-on-year in January.
Finance Minister Ishaq Dar is scheduled to speak to the media later on Friday.
With the halted tranche, $1.4 billion remains of the $6.5 billion bailout that is due to end in June.
IMF financing is crucial to the country’s $350 billion economy, which is facing a balance of payments crisis with foreign reserves falling to less than three weeks’ worth of imports. Last week, Prime Minister Shahbaz Sharif called Pakistan’s economic situation “unimaginable.”