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Experts warn of ‘tough time’ ahead as Pakistan-IMF talks end without agreement

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Pakistan and the visiting International Monetary Fund (IMF) mission failed to arrive at a staff-level agreement after talks aimed at unlocking critical funds needed for the ailing South Asian economy concluded on Thursday with both sides agreeing to continue negotiations virtually.

The mission was in Islamabad since January 31 to sort out the differences over fiscal policy that have stalled the release of more than $1 billion from the $6.5 billion bailout package originally signed by the government of prime minister Imran Khan in 2019.

However, at the end of the 10-day “tough parleys”, Pakistan failed to strike the deal with the Fund mission. Although Secretary Finance Hamed Yaqoob Sheikh confirmed that “actions and prior actions have been agreed, but the staff level agreement will be signed subsequently.”

It should be noted that the IMF’s loan is critical for the country’s $350 billion economy as the State Bank of Pakistan (SBP)-held foreign exchange reserves have fallen to $2.91 billion — enough to provide an import cover of 0.58 months.

‘Atrocious’ strategy

Uzair Younus, director of the Pakistan Initiative at the Atlantic Council’s South Asia Centre, while commenting on the development, told Geo.tv that the communications strategy of the [Ishaq] Dar-led Ministry of Finance has been atrocious from the very beginning.

He warned that this was “only the latest in a series of fiascos” that have destroyed the ministry’s credibility and undermined confidence in the economy.

The economic expert predicted that a bloodbath will be seen in the markets, as players earlier refrained from assuming fresh positions in the last few sessions on hopes of the revival of the stalled programme.

‘Tough days ahead’

Vaqar Ahmed, deputy executive director at Sustainable Development Policy Institute (SDPI), told Geo.tv that the MEFP shared has a broader framework which hints that in the days to come Pakistan would have to meet certain conditions.

“The Fund has rejected the gradual approach proposal of Pakistan, saying the time for this has gone and Islamabad now needs to do everything upfront,” he said, revealing that the conditions which are currently on the table incorporate all those promises made during the past reviews, including those related to energy sector, power and gas tariff, levy on diesel, and tax gaps.

The economist said that the Washington-based lender first wants to see action on all these things before it concludes the review, their board gives the approval and transfers the money.

“I believe that there are tough days ahead and the government will first have to show that they can walk the line and then probably the IMF will come through and a board level agreement will be reached,” Ahmed said, adding that he thinks all of this will take approximately one month.

‘Implementation time’

Meanwhile, former adviser to Finance Ministry Dr Khaqan Najeeb lamented that Pakistan should have inked a staff-level agreement with the IMF mission before their departure.

“Still, it is heartening to note that considerable progress has been made on the set of policy reforms that are needed to move forward to complete the review,” he said, adding that it was for authorities to undertake the prior actions, complete reading of the MEFP document received to enable a staff-level agreement. 

The former adviser highlighted that dwindling reserves do not leave much option but to expedite this process already delayed since early November. 

“The actions on revenue, energy, monetary and exchange rate management are quite clear along with the need to firm up commitments for external financing from bilateral and multilateral partners. 

“It is implementation time for the country to address domestic and external imbalances and to regain macroeconomic stability,” he maintained.

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Finance Minister Meets With World Leaders at World Economic Forum in Davos

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During his attendance at the World Economic Forum in Davos, Switzerland, Finance Minister Muhammad Aurangzeb has met with officials of organisations and leaders of many nations.
Bangladesh’s Chief Advisor, Muhammad Younas, met with Mohammad Aurangzeb.
On the fringes of the World Economic Forum’s Annual Meeting 2025 Opening Banquet, there was an informal meeting.
Additionally, the Finance Minister met with Anwar Ibrahim, the Prime Minister of Malaysia.
Both leaders discussed economic cooperation and bilateral ties.
Muhammad Aurangzeb also had a meeting with Dp World’s Rizwan Soomro and Yuvraj Narayan.
They talked about how to strengthen Pakistan’s logistics and infrastructure systems to support trade.
“The Pakistani government is committed to advancing joint projects and values partnerships in both business-to-business and business-to-government cooperation,” the finance minister added.

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China will establish a $250 million EV production facility in Pakistan.

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As Islamabad looks to Beijing to work with it to establish industrial zones for the production of electronic vehicles, the media said Wednesday that China’s ADM Group would invest $250 million to establish an electric vehicle manufacturing unit in Pakistan.

With an even more ambitious target of 90 percent by 2040, the Pakistani government established the National Electric Vehicles Policy (NEVP) in 2019 with the goal of having 30 percent of all passenger cars and heavy-duty trucks be electric by 2030.

By 2030, the policy aimed to achieve 50% of new sales for two- and three-wheelers and buses, and by 2040, 90%.

As part of the Special Investment Facilitation Council’s efforts to draw in foreign investment, Radio Pakistan reported that the Chinese company ADM Group had announced an investment of $250 million to establish an EV manufacturing plant in Pakistan.

“The switch to EVs is anticipated to save billions of dollars by reducing the cost of fuel imports.”

More than 3,000 electric vehicle charging stations will be installed throughout Pakistan, a South Asian nation, as part of ADM Group’s $350 million investment in the EV industry last year.

Pakistan announced earlier this month that, as part of its ongoing energy sector reform aimed at increasing demand, it would reduce the power rate for operators of electric vehicle charging stations by 45 percent.

Additionally, financial programs for e-bikes and the conversion of gasoline-powered two- and three-wheeled vehicles are planned by the government.

On January 15, the government approved a lower tariff of 39.70 rupees ($0.14) per unit, which will take effect in a month. The previous tariff was 71.10 rupees.

The government anticipates that investors in the industry will see an internal rate of return of over 20 percent.

There are currently over 30 million two- and three-wheeled cars in Pakistan, and they use more than $5 billion worth of petroleum each year, according to a report that Power Ministry adviser Ammar Habib Khan provided to the government and that was covered by Reuters.

The paper estimates that the ministry will save around $165 million in gasoline import expenses each year by converting 1 million two-wheelers to electric motorcycles in a first phase, at an estimated net cost of 40,000 rupees per bike.

In September, BYD Pakistan, a joint venture between China’s BYD and the Pakistani automaker Mega Motors, informed Reuters that, in accordance with international goals, up to 50% of all vehicles purchased in Pakistan by 2030 will be electrified in some way.

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The government has introduced a comprehensive strategy to enhance industrial investment.

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Authorities are poised to execute an ambitious investment promotion strategy through a collaborative initiative between the National Institute of Public Administration (NIPA) and the Pakistan Administrative Staff College, aiming for substantial enhancements in industrial investment and economic development.

The Special Investment Facilitation Center (SIFC) will be instrumental in this transformative drive by establishing “Business Facilitation Centers” aimed at optimizing investment processes and attracting both domestic and foreign capital.

Principal features of the comprehensive plan encompass:

  1. Forming collaborative working groups to augment domestic and international investment prospects
  2. Formulating a comprehensive strategy to eradicate obstacles to industrial development
  3. Formulating a novel model to tackle issues in the execution of industrial projects
  4. Striving to enhance Pakistan’s international business rating by 50 points
    Targeting $20 billion in foreign industrial investments within the next five years.

The approach prioritizes digital transformation to enhance the transparency and efficiency of the investment process. SIFC’s strategy emphasizes fostering a favorable atmosphere for investors by streamlining bureaucratic processes and offering strategic assistance.

National administration officers are conducting ongoing study to identify and mitigate potential investment barriers, while a specialized research group is formulating a comprehensive strategy to solve current hurdles in industrial growth.

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