IMF delay.

PAKISTAN and the IMF are understood to have bridged the gap on showing flood-related expenditure in the country's budget for the present financial year after an online meeting between Finance Minister Ishaq Dar and the Fund's mission chief Nathan Porter on Thursday.

However, the IMF has reportedly not confirmed a date for the start of the ninth performance review of its $7bn bailout package, further delaying the disbursement of the next tranche of $1.2bn. A media report has quoted a finance ministry official as saying that the tranche may not materialise until January if the IMF does not send its mission to Islamabad in the next two weeks.

The talks were originally due in the last week of October, but were rescheduled for Nov 3, before being put off again because of differences over flood-related expenditure estimates.

The delay in the next programme review and the subsequent release of the funds is making the markets jittery, with Pakistan's perceived default risk, measured by the five-year credit default swap, jumping from 56.5pc to above 75pc on Wednesday, because of concerns that Islamabad could default on its upcoming payment of $1bn against the maturity of Sukuk on Dec 5.

The fears may be exaggerated as stated by the State Bank governor earlier, but the markets remain on edge due to declining foreign exchange reserves that dropped to below $8bn last week.

The finance ministry hasn't given a clear idea of the progress made in the online meeting or if the government is in a position to meet IMF demands for initiating the review for early disbursement of the tranche.

...