Islamabad Set For $1 Billion IMF Tranche Amid Tough Review

Pakistan is set to secure a crucial disbursement of over $1 billion from the International Monetary Fund (IMF), expected early next month, as policy level talks in Islamabad continue this week to conclude the second review of the Enhanced Fund Facility (EFF).

The third tranche, totaling more than $1 billion, is anticipated despite the review mission flagging several slippages in meeting programme targets, particularly in revenue collection and provincial cash surplus commitments. Technical discussions between the authorities and the visiting IMF team have wrapped up, with the focus now shifting to high level negotiations to agree on waivers and additional corrective measures.

The review, which also covers the $1.4 billion Resilience and Sustainability Facility (RSF), has been complicated by recent flood related challenges. The government is expected to seek some relaxations in targets, arguing for flexibility in light of the economic impact of the devastation.

However, the Fund has reportedly taken a tough stance on structural reforms. A key sticking point is the failure of both federal and provincial governments, notably Punjab and Sindh, to meet fiscal surplus targets and establish a comprehensive mechanism for agricultural tax collection. The provinces are under pressure to correct their fiscal course, even as they face increased flood related spending demands.

Finance Minister Muhammad Aurangzeb and the IMF mission are working towards wrapping up the review process by the weekend. Sources indicate that a favourable global political environment, with key voting members backing Pakistan, remains a positive factor.

A successful conclusion to the review is vital for Pakistan’s fragile economy, providing necessary financing to support the country's external account stability. The disbursement, subject to final approval by the IMF's Executive Board, is expected to maintain momentum on a tough reform agenda aimed at achieving macroeconomic sustainability and laying the foundation for long term, job rich growth.

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