ISLAMABAD - Pakistan would formally request for fresh loan worth $ 5.4 billion from International Monetary Fund (IMF) today (Wednesday), as both the sides agreed to the terms of the package.

Sources said Pakistan would apply for $ 5.4 billion loan package from IMF on Wednesday, as Islamabad and the Fund finalised the terms and conditions on Tuesday. Pakistan also hopes to get Letter of Comfort from IMF that would help receiving money of $ 6 billion from other financial institutes like World Bank, Asian Development Bank (ADB) and other countries. Pakistan hopes to receive $ 11 billion in ongoing financial year 2013-2014 from IMF, World Bank, Asian Development Bank and other countries to build foreign exchange reserves of the country.

Sources further said policy level dialogue between Pakistan and IMF concluded late on Tuesday night. Pakistani team was headed by Finance Minister Ishaq Dar and IMF delegation was led by Jaffery Frank. Pakistan and IMF have agreed on all issues and paperwork would be finalised on Wednesday.

Sources said Pakistan has consented to increase the power tariff by withdrawing subsidy, as demanded by the IMF. The government is currently paying Rs 6 per unit subsidy on power sector. Government would completely withdraw the power subsidy in three years.

Similarly, the government has also given its consent to increase the discount rate, as inflation rate has already started upward journey. The State Bank of Pakistan in its last monetary policy reduced the discount rate by 50 points to 9 per cent from 9.5 per cent, which was criticised by the IMF.

Sources further said that Pakistan also accepted the Fund’s condition to increase the revenue generation. However, government would not impose new taxes but it would withdraw tax exemptions through SRO/notification in the months to come. The government would improve its tax administration and the tax audit system that would help generate billions of rupees, the Fund was told. Pakistan has assured that it would achieve the revenue collection target of Rs 2,475 billion set for the ongoing financial year 2013-2014. 

Pakistan has also assured the Fund that government would expedite the process to recover power dues.

After getting assurance, the Fund agreed to give fresh loan package worth $ 5.4 billion to Islamabad to repay the previous loans for the period of 10 to 15 years.