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Pakistan’s external position under immense stress, says Moody’s

ISLAMABAD: Moody’s Investors Service said that the external vulnerability risks for Pakistan have increased due to uncertainties.

In a statement, the international credit-rating agency said that the elevated risks will affect Pakistan’s position in obtaining required foreign financing.

From Monday, Pakistan and IMF will resume talks virtually after holding face-to-face discussions in Islamabad for 10 days. The bilateral talks, however, ended without signing a deal.

“There is no certainty yet on whether, and if so when, IMF financing will be forthcoming,” Moody’s added.

“The financing from IMF will catalyse funding from other multilateral and bilateral partners. It is crucial to alleviate Pakistan’s liquidity stress,” Moody’s said.


The government has received the Memorandum of Economic and Financial Policies (MEFP) from the International Monetary Fund (IMF) regarding the conclusion of the ninth review of a $7 billion loan program, according to Finance Minister Ishaq Dar.

He said that the government and Fund representatives would attend a virtual discussion on this subject on Monday. “We insisted that they (the Fund delegation) give us the MEFP before departing so we could look at it over the weekend,” he said.

He continued, “I am confirming that we received the MEFP draught at 9 am today.

Immediately after IMF Mission Chief Nathan Porter delivered a concluding statement stating that virtual conversations will continue between the two sides in the following days. These conversations will be done to finalize the implementation of key targets. The finance minister revealed these specifications during a press conference in Islamabad.

Talks between the government and the IMF took place from January 31 to February 9. There was significant uncertainty regarding the results of the discussions. Moreover, whether a MEFP draft had been shared as the visiting party departed without making a concluding statement.

Dar said there was no confusion during his press appearance today. He said that the government and Fund representatives would attend a virtual discussion on this subject on Monday. “We insisted that the Fund delegation should give us the MEFP before departing. So that we could look at it over the weekend,” he said.

He continued, “I am confirming that we received the MEFP draft at 9 am today. Over the weekend, we will thoroughly review the (MEFP) draft. Furthermore, we will have a virtual meeting with the Fund officials. It will undoubtedly require several days.

MEFP’s importance

The MEFP is a crucial document that outlines all of the requirements and procedures. Moreover, it outlines policy directives upon which the two parties proclaim the staff-level agreement.

The two parties discussed the proposed policy measures after sharing the draft MEFP. After the discussions, a staff-level agreement is signed and sent to the Executive Board of the Fund.

The finance minister said that IMF has demanded improvements in a few areas which was in Pakistan’s interests.

The government would get $1.2 billion from the IMF after signing of the deal, according to the finance minister.
Dar outlined the policy steps that the government and the IMF had agreed upon, stating that taxes totaling Rs170bn would be implemented. We shall make an effort to avoid enacting any taxes that directly affect the average person.

Policy initiatives

He added that circular debt needs to be reduced to zero and that the government had also committed to reducing untargeted subsidies in the gas and energy industries. The minister stated that the PDL on gasoline has already been increased to Rs. 50 per liter as promised, and the PDL on diesel would follow suit in the upcoming months.

“We have agreed to boost the Benazir Income Support Programme (BISP) funding to Rs400 billion from Rs360 billion now to assist the most vulnerable individuals affected by inflation.”

“The IMF team welcomes the prime minister’s commitment to adopt policies needed to protect macroeconomic stability and acknowledges the authorities for the productive conversations,” said the final statement released by IMF Mission Chief Nathan Porter.

IMF declaration

The statement highlighted important priorities, such as strengthening the fiscal position with long-term revenue measures and reducing untargeted subsidies, while stepping up social protection to assist the most vulnerable and flood victims. Furthermore, allowing the exchange rate to be determined by the market to gradually end the foreign exchange shortage, and improve energy provision by preventing the additional accumulation of circular debt and assuring the viability of the sector.

Javed Mahmood
Written By

I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.


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