Cash-strapped Pakistan on Tuesday held a first round of talks with the International Monetary Fund (IMF) in a bid to unlock stalled funds from a $7 billion bailout to ward off economic meltdown.
Finance Minister Ishaq Dar met IMF Pakistan Mission Chief Nathan Porter, the finance ministry said, and briefed him on the "fiscal and economic reforms and measures being taken by the government in different sectors".
The IMF funding is critical for Pakistan, which has barely enough foreign exchange reserves to cover three weeks of imports. Fuel comprises the bulk of the import bill.
Pakistan secured a $6 billion IMF bailout in 2019, which was topped up with another $1 billion last year.
The talks, to continue through Feb. 9, are meant to clear the IMF's 9th review of its Extended Fund Facility, aimed at helping countries facing balance-of-payments crises.
The lender had set several conditions for resuming the bailout, including a market-determined exchange rate for the local currency and an easing of fuel subsidies.
Last week, Pakistan removed an artificial cap on the rupee, resulting in it losing 14.73% in interbank trading during the last three trading sessions.
The central bank said the rupee gained 0.65% against dollar on Tuesday in inter-bank trading, but, according to the exchange companies' association, lost 0.54% in the open market.
"We believe that the rupee's weakness still has further to run, particularly with Pakistan's balance-of-payments position likely to remain weak for several more months," Fitch Solutions said.
New measures also include taxation, shedding power sector debt and hiking energy prices, with people already facing 24.5% inflation.
The central bank also raised interest rates this month by 100 basis points to fight inflation.
The finance ministry, which raised fuel prices by 16% over the weekend ahead of the talks, said in its monthly report issued on Tuesday that fiscal consolidation was key to saving official reserves and exchange rate stability.