By Ariba Shahid
KARACHI (Reuters) -The International Monetary Fund has asked for more time for negotiations with Pakistan over a deal that would unlock $1.1 billion in much-needed funds for the country, Secretary of Finance Hamed Sheikh said Thursday.Cash-strapped Pakistan, pushed to the limit by last year’s devastating floods, had been host to the talks since late last week in a bid to access the funds, a tranche initially expected last December and part of the IMF’s $6.5 billion bailout aimed at warding off an economic meltdown.
“The staff level agreement between Pakistan and IMF will be reached soon,” Sheikh, a senior official at the Ministry of Finance, said in a statement to Reuters. “The IMF mission asked for more time for staff-level negotiations.”
He said both sides had agreed on “actions and advance measures.” The staff-level talks were due to conclude on Thursday.
Broadcaster Geo reported hours earlier, citing sources, that all matters had been settled between both sides over the bailout.
To release the funds, the IMF needs to reach a staff-level agreement with Pakistan, which Sheikh said would then be agreed upon after approval from the IMF’s head office in Washington.
Analysts say the money is necessary to prevent Pakistan from defaulting on external payment obligations, and that an IMF deal paves the way for other organisations and governments to provide funds. The fiscal adjustments demanded by any deal, however, are likely to fuel record high inflation, which hit 27.5% year-on-year in January, analysts say.
Finance Minister Ishaq Dar was quoted earlier on Thursday by Pakistan’s Dawn newspaper as saying “it is expected matters will be settled today.”
If a deal is reached and funds are dispersed, $1.4 billion would remain of the $6.5 billion. The bailout programme, approved in 2019, is due to end in June.
The IMF funding is crucial for the country’s $350 billion economy, which is facing a balance-of-payments crisis with foreign exchange reserves dipping to less than three weeks of import cover. Last week, Prime Minister Sharif called Pakistan’s economic situation “unimaginable.”
(Writing by Miral Fahmy and Charlotte Greenfield; editing by Sudipto Ganguly and Sharon Singleton and Caitlin Webber)
