ISLAMABAD – In their dialogues for the release of the next $550 million loan tranche, Pakistan and the International Monetary Fund (IMF) broadly reached an agreement, but differences persist over finding a permanent solution to the issue of circular debt which has mounted to Rs310 billion.
As per government officials participating in the negotiations with IMF, no agreement on the issue of addressing the circular debt problem has yet been reached with the IMF and is the subject to further deliberations. Finance Minister Ishaq Dar and outgoing IMF Mission Chief to Islamabad Jeffrey Franks are expected to announce the outcome of talks in Dubai on Thursday (today).
The IMF wants to add a condition to its $6.6 billion bailout of the Pakistani economy that would force the government to honour its commitments to come up with a more permanent solution to the circular debt problem. In the fifth review of Pakistan’s economy, held in Dubai two months ago, Pakistan had assured the IMF that it had worked out a plan to address the circular debt issue. The plan included recovering receivables in the power sector, improving efficiency and collections, and using fiscal resources. However, chronic infighting between the finance ministry and the water and power ministry, coupled with a weak governance structure at the state-owned power companies, resulted in a lack of coordination and the government’s failure to implement the plan.
