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Thursday March 28, 2024

Country’s economic healthPakistan, IMF to start talks next week

By Mehtab Haider
November 20, 2017
ISLAMABAD: Amid increasing speculations about possibility of resignation by Finance Minister Ishaq Dar, Pakistan and the International Monetary Fund (IMF) are scheduled to initiate parleys from the first week of next month (December) under Post Programme Monitoring (PPM) in order to gauge economic health of the country, The News has learnt.
Both the Ministry of Finance as well as the IMF high-ups confirmed on Sunday that the upcoming PPM negotiations would be held in first week of next month as the Fund mission agreed to visit Islamabad by lowering security alert. The IMF’s high-ups are expected to get increased perks and privileges for visiting Islamabad amid tight security situation.
The IMF team has so far agreed to visit Islamabad in first week of December and will stay here for almost seven to 10 days for gauging the economic health of the country. The IMF’s findings about strong economic fundamentals can pave the way for getting dollar inflows in shape of loans from multilateral banks such as the World Bank and Asian Development Bank (ADB). The upcoming talks under the PPM are quite crucial for Pakistan owing to increased vulnerabilities on internal and external accounts of the country as yawning current account deficit and its financing would have far reaching impact for the country’s economy.
The government had taken measures to enhance and impose Regulatory Duty (RD) on several items and also placed non-tariff barriers in order to discourage rampant increase in imports. But these steps were taken by the government after lapse of several months, so its impact would come on surface with some delay.
On internal accounts, although, the government managed to curtail the budget deficit at 0.9 percent of the GDP for the first quarter of the current fiscal year, but it would have to strive hard for maintaining hard earned fiscal discipline during an electioneering year in the country. Under the IMF arrangement, when a member country borrows money from the Fund, its policies come under closer scrutiny.
Once a country has completed its lending programme, it may be subject to the PPM which is an important part of the Fund’s safeguard architecture. The PPM is generally expected for all member countries that have substantial IMF credit outstanding following the expiration of their programmes. The aim is to identify risks to such member countries’ medium-term viability and provide early warnings on risks to the Fund’s balance sheets. Should it become necessary, IMF staff will advise on policy actions to correct macroeconomic imbalances.
IMF financing provides member countries with the breathing space they need to correct their balance of payments problems. A policy programme supported by the IMF financing is designed by the national authorities in close cooperation with the Fund.
Continued financial support during the programme is conditional to the effective implementation of the policies. A country’s return to economic and financial health during the programme and in the medium term ensures that IMF funds are repaid, and can be made available to other member countries. The PPM helps support this process.