Are Pakistan-IMF loan talks back on track? Here’s why deal may take a while

Pakistan and the International Monetary Fund (IMF) pledged to continue loan negotiations despite both reaching a deal amid deep economic crisis in the country.

Securing an IMF deal is crucial for Pakistan as it needs more aid to avert a default as the country’s foreign currency reserves have fallen to less than $3 billion.

But the $6.5 billion loan program could not be decided upon even after IMF staff-level discussions that extended past the scheduled end date of February 9. IMF wants Pakistan to strengthen it fiscal position with permanent revenue measures while reducing untargeted subsidies and allowing the exchange rate to be market-determined, Bloomberg reported. IMF also wants Pakistan to make sure that the country’s energy sector is viable.

“The timely and decisive implementation of these policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development,” IMF said in a statement.

“Virtual discussions will continue in the coming days to finalize the implementation details of these policies,” it added.

Pakistan, on the other hand, will start virtual discussions after receiving an agreement draft last week, country’s finance minister Ishaq Dar said. Pakistan has taken some steps to meet the IMF’s demands like loosening its grip on the rupee and raising fuel prices last month.

Although, Pakistan’s prime minister Shehbaz Sharif said earlier this month that IMF’s demands were “beyond imagination” as the country deals with the aftermath of devastating floods last year.

The country has had a tumultuous track record with the IMF as most of its previous bailouts- 13 since the late 1980s- weren’t completed.