Pakistan Eyes Swift IMF Staff-Level Agreement Amid Flood Loss Verifications
The countdown is on for Pakistan to finalise a staff-level agreement (SLA) with the International Monetary Fund (IMF), with officials signalling that a consensus could be reached at the upcoming IMF-World Bank annual meetings. The discussions, focused on the external account and verified flood-related losses, dovetail with broader fiscal adjustments across central and provincial budgets.
What Is at Play in the SLA Negotiations?
Sources quoted by the Dawn newspaper indicate that the finalisation hinges on two pivotal components: the state of the external account and the verified flood-related losses, along with corresponding fiscal adjustments. The MEFP, or Memorandum of Economic and Financial Policies, has reportedly been shared with Pakistani authorities, setting the stage for a final review by the IMF mission.
Recent IMF Mission and Key Timelines
The IMF delegation conducted consultations in Karachi and Islamabad from September 24 to October 8, focusing on the second review under the Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF). Officials say the SLA was near completion, but two crucial tables within the MEFP required additional refinements. Foremost among concerns is ensuring data on remittances supports Pakistan’s external account position.
Why External Accounts and Flood Losses Matter
External accounts and flood damage verification are central to Islamabad’s policy credibility with the IMF. A robust external position underpins Pakistan’s ability to service debt and sustain policy measures, while flood-related losses implicate virtually the entire fiscal framework—from subsidies and development spending to provincial cash surplus targets.
Fiscal Coordination Across Tiers
Officials emphasise that whenever flood losses are verified and incorporated, the government must align the central budget with provincial accounts. This alignment includes ensuring timely disbursement of subsidies, paying pending bills in flood-affected districts, and maintaining disciplined development spending. Provinces are expected to deliver cash surplus targets even as flood-related adjustments are made to their budgets.
Monetary and Subsidy Implications
Despite progress, Pakistan’s central bank remains cautious. The State Bank of Pakistan (SBP) is likely to retain a tight stance on monetary policy to counter rebounding inflation, even as the IMF’s stance underscores the need for timely corrective measures. Tariff adjustments may be part of those measures, reflecting the IMF’s emphasis on sustainability and fiscal responsibility.
What Comes Next
As the IMF mission wraps up, the government anticipates a combined tranche of around USD 1.2 billion from the EFF and RSF facilities, pending board approval. The timing hinges on next week’s policy-level discussions and the SLA’s final outcome. An end-of-mission IMF statement praised progress in key areas and reiterated a willingness to settle any outstanding issues while expressing sympathy for those affected by floods.
Broader Implications for Pakistan
Approval of the SLA would bolster Pakistan’s international financing prospects and provide a roadmap for stabilising the macroeconomy, supporting essential development projects in flood-affected regions, and strengthening resilience against future shocks. Yet the path remains contingent on the meticulous alignment of external accounts, verified flood losses, and provincial fiscal discipline.
Expert Perspective
Analysts note that success depends on credible data, timely policy adjustments, and a clear commitment to reform. The IMF’s tone suggests confidence in the authorities’ ability to implement measures while extending sympathy to those impacted by the floods.
As Pakistan prepares for the IMF-World Bank annual meetings, the coming days will be critical in determining whether the SLA can be finalised and whether the anticipated tranche can unlock further support for the country’s stabilization and growth agenda.
