The negotiations relate to the resumption of disbursements by the IMF of a staggered loan of 6.5 billion dollars, of which only nearly half has so far been disbursed.

Obtaining support from the IMF is vital for Pakistan, at a time when its foreign exchange reserves are at their lowest point, posing the threat of a default.

Discussions with the IMF team, which ended Thursday evening in Islamabad, led to "considerable progress (...) on policy measures to correct internal and external imbalances," the monetary organization said in a statement.

"Remote discussions will continue over the next few days to finalize the details of the implementation of these policies," the IMF added.

The economy of the world's fifth most populous country has collapsed alongside a latent political crisis, with a falling rupee and inflation reaching levels not seen in decades, as well as recurrent difficulties in repaying its colossal debt. .

Last summer's devastating floods and a major energy shortage have added to the pressure.

Photo provided by the press service of the Pakistani authorities, of a meeting with the IMF delegation, January 31, 2023 in Islamabad © - / PAKISTAN PRESS INFORMATION DEPARTMENT/AFP

Pakistani Finance Minister Ishaq Dar assured Friday that the talks had "concluded successfully" and that a draft memorandum of understanding had been handed over to the government by the IMF team.

However, no formal agreement has been announced by either party.

The IMF delegation had arrived on January 31 to negotiate the disbursement of a new tranche of financial assistance of 1.2 billion dollars, in exchange for draconian conditions which the Pakistani Prime Minister, Shehbaz Sharif, estimated that they " (beyond) the imagination".

The IMF has notably called for further increases in the cost of petrol, gas and electricity, to tackle the structural problem of the "circular debt" of the energy sector, the reduction of the budget deficit, the end of exemptions export taxes and improved tax collection, according to a Pakistani government source.

Dollar shortage

An agreement with the IMF would then allow Pakistan to obtain additional aid from the Gulf countries or China, as well as from multilateral lenders such as the World Bank.

In an exchange office in Karachi, January 26, 2023 © Asif HASSAN / AFP/Archives

The IMF has been irritated by the Pakistani government's failure to honor its past commitments, fearing that it will pay the price at the ballot box during the legislative elections scheduled for the end of the year.

Despite all its reluctance, the government finally let go of ballast at the end of January, by renouncing its interventions on the foreign exchange market, then by increasing the price of gasoline, two conditions required by the IMF for the resumption of negotiations.

On Friday, Mr. Dar announced an additional hike of about 4% in the price of gasoline and an increase in taxes, without giving further details.

The measures desired by the IMF could lead to a further rise in inflation.

In January, prices rose 27.55% year on year, according to the statistics office, a peak since May 1975.

Pakistan's central bank's foreign exchange reserves fell another $170 million in a week, standing at $2.9 billion on Feb. 3, according to figures released Thursday.

By early 2023, they had fallen to less than $6 billion, the lowest in nearly nine years.

In a steelworks in Islamabad, February 9, 2023 © Aamir QURESHI / AFP

Due to the shortage of dollars, banks have refused since the beginning of the year to open new letters of credit for importers, except for essential foodstuffs and medical products.

Thousands of containers are thus blocked in the port of Karachi.

The industry has already paid heavily for these blockages.

She fears that more factories will be forced to close, which would have catastrophic consequences for employment.

"The business world will be disappointed. The only way to find stability is through an agreement. The fact that the IMF is leaving without an agreement increases the uncertainty," said AFP. Abid Hasan, a former World Bank economist.

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© 2023 AFP