The IMF board will likely meet in the middle of next month to consider the next tranche of Pakistan’s US$11.3 billion loan, a source close to talks between IMF officials and Islamabad said on Friday.
Pakistani finance officials were in Washington last week for spring meetings of the IMF and are also talking to the World Bank and the Asian Development Bank (ADB) over steps being taken to raise electricity tariffs and other taxes that are unpopular with the public and politically risky for the government.
The IMF’s board had originally been scheduled to meet on March 31 to approve the next portion of the emergency package, which was first agreed on in November 2008 to avert a balance of payments crisis in Pakistan and shore up reserves.
Pakistan’s budget has also been strained by the cost of battling Taliban insurgents along its border with Afghanistan.
The source, who asked not to be named as the issue is sensitive, said talks with Pakistani officials would continue this weekend and the board meeting would likely be in the middle of next month to release the fifth installment, worth about US$1.2 billion.
He said that no definite date had been set, but ruled out the possibiloty that meeting would be held on May 3, as announced by the Pakistani prime minister’s office last week.
“They are moving forward and things are going to be resolved very soon,” the source said of current negotiations.
Experts said the Pakistani government was coming under increasing pressure from financial institutions, but there appeared to be some flexibility on the part of the IMF, which understood Islamabad was in a tight political and fiscal spot.
“The IMF understands the dynamic here and will give some breathing space,” said Maria Kuusisto, a Pakistan expert with the political risk research firm Eurasia Group in London.
“It [Pakistan] needs the next tranche, but it cannot afford the political backlash against it by increasing tariffs now,” she said.
Pakistan is battling a chronic electricity shortage, with rolling blackouts countrywide and is also struggling to keep its budget deficit at the levels required under IMF reforms.
Under the IMF program, the deadline for another increase in electricity tariffs was April 1, but Pakistan failed to meet that and has also been slow in implementing a value-added tax.
The IMF board meeting was delayed in part because the IMF has been waiting for the World Bank and the ADB to say it was satisfied Pakistan would keep its commitment to deal with both the power tariff issue and “circular debt.”
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