Pakistan and the International Monetary Fund (IMF) on Thursday failed to reach a staff-level agreement but agreed to a broad framework aimed at satisfying the lender of the last resort in the coming days.
The Fund has rejected the “gradual approach” proposal of Pakistan, saying everything has to be done upfront.
The deadlock in the talks came after Pakistani officials refused to accept the condition of a cut of 10-20 per cent in the defence budget as committed in earlier talks.
According to a source in the Finance Ministry, everything was going smoothly until Finance Minister Ishaq Dar requested the IMF Mission Chief to remove the condition of ‘Cut in Defence Budget’. Dar said Chief of Army Staff General Asim Munir was in the United Kingdom on an official visit and the government needed some time to discuss the defence budget with him.
Sources said this was the turning point, where the IMF Mission chief stopped the dialogue and decided to leave Pakistan without signing the Staff-Level Agreement.
Confirming that the IMF mission is leaving early on Friday morning, Secretary Finance Hamed Yaqoob Sheikh said: “Actions and prior actions have been agreed, but the staff level agreement will be signed subsequently.”
The IMF discussed the draft of the Memorandum for Economic and Financial Policies just before the end of the scheduled review talks, leaving no room for the staff-level agreement on the same day.
Due to the severity of the economic crisis in Pakistan, every agreed measure would be tough on most Pakistanis, the source revealed.
External funding is crucial for the $350-billion Pakistan economy facing a balance-of-payments crisis with the country’s foreign exchange reserves slipping below $3 billion ($2.9 billion) for the first time in nine years on Thursday, reducing import capacity to just 10 days.
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