Islamabad: Since February, when formal talks resumed between Pakistan and the IMF for the completion of the ninth review of the lender's stalled USD 6.5 billion funding programme, it has been a 'one step forward, two steps back' situation for Pakistan. Dawn reported that every time the elusive deal seems within reach, a new hurdle crops up.

Now the IMF has said that it is preparing to discuss Pakistan's budget plans for the coming financial year as part of a process to unlock a crucial financing injection.

This is being seen as a fresh obstacle to the release of the pending bailout funds amounting to USD 2.6bn. Thus, many are assuming that the programme will remain in limbo at least until the next budget is passed, Dawn reported.

The new condition isn't surprising, considering that Pakistan must hold general elections in October and PML-N ministers are already appearing on TV to assure the people of Pakistan of a significant "relief".

The IMF would not want the government to take its dollars and spend the money to win the elections.

Pakistan will need another IMF programme once this one ends. For that, Islamabad needs to bridge the trust gap with the lender, Dawn reported.

Despite assistance from the UAE, Saudi Arabia and China, the financing gap of up to USD 2bn remains. Further, the IMF seems averse to combining the remaining two reviews with the ninth review and releasing the entire amount at one go to keep the fiscal authorities in check. This is even though the present facility will end in June, Dawn reported.

The new conditions and the refusal to combine the reviews reflect the widening trust gap, which is not surprising considering the multiple deviations from the programme in the last four years.

The IMF deal is crucial for tackling Pakistan's severe balance-of-payments crisis, and avoiding default and potentially difficult debt restructuring. Without a staff-level agreement for the held-up USD 1.1bn tranche since November, foreign exchange reserves have declined to USD 4.5bn, just enough for a month of controlled imports, Dawn reported.

According to Fitch Ratings, the country faces a total of USD 3.7bn in debt payments in the next two months till the end of June. About USD 700m in maturities are due in May and USD 3bn in June.

Fitch expects USD 2.4bn of the deposits and loans from China to be rolled over, reducing some pressure on the reserves. But it will be folly to expect China to lessen the burden so easily, Dawn reported.

Pakistan has already taken all the agreed steps to unlock the funding, with external financing remaining the last hurdle. It is required to assure that its "balance-of-payments deficit is fully financed for the fiscal year ending" to secure the next tranche.