As the IMF begins the fourth economic review to assess the observance of end-Dec’09 targets, the GoP is reportedly considering negotiating for increased credit allocation to bridge the shortfall created by the delay in FoDP funding. The following table shows that all quantitative targets for Dec’09, except for the budget deficit, were met by the GoP. Considering that the fiscal slippage has only been marginal, where reportedly 1HFY10 fiscal deficit has been only ~0.3% of the GDP higher than the target for the period, we think that the GoP should qualify for the release of the US$1.2bn tranche from the IMF by early Mar’10. This would take the country’s reserves to US$16.4bn, enough to finance around 6.5 months of imports. Despite the improvement in the country’s total forex reserves we think that the PkR exchange rate value erosion against the US$ will likely continue over the coming months. This is because “core” Forex reserves, which exclude the short term IMF financing for Balance of Payment support, have remained largely stagnant in the last three months. This, in our view, highlights a tight position in the Forex Market.