IMF WELCOMES PM’S ‘COMMITMENT’.

ISLAMABAD   -   Pakistan has vowed to imple­ment all prior actions of the In­ternational Monetary Fund (IMF) including increasing pow­er and gas tariffs and announc­ing a mini budget of Rs170 billion to revive the loan pro­gramme in order to avoid the country’s default after building its foreign exchange reserves with the help of inflows from the Fund and bilateral and multilat­eral partners.

Pakistan and IMF could not reach a staff-level agreement as the talks between the two sides ended on Thursday last. The IMF has set prior actions for signing the staff-level agreement. Both the sides would resume virtual talks from Monday.

Addressing a press conference here on early Friday, Finance Minister Ishaq Dar committed to keep making efforts to ensure Pakistan completed the IMF pro­gramme. He said that the gov­ernment has received the draft of the Memorandum of Econom­ic and Financial Policies (MEFP). “We will go through it on the weekend. A virtual meeting with the IMF will be held after that on Monday,” he said and further ex­plained that once the MEFP has been finalised, the IMF has its own internal process and then a Board meeting is held. And then finally, when approval is given, the [tranche] is disbursed. “It is a standard process which can neither be shortened, and hope­fully they won’t extend it unnec­essarily,” Dar added.

“We are working to revive the IMF’s programme and current­ly there is no proposal for debt restructuring,” said an official of the ministry of finance. He fur­ther said that the Economic Co­ordination Committee (ECC) of the Cabinet on Friday approved Circular Debt Management Plan and soon it would announce a mini budget to comply with the directives of the IMF.

The Finance Minister informed 

that the government would an­nounce a mini budget worth of Rs170 billion to fulfil prior ac­tions of the IMF. “Taxation mea­sures of Rs170 billion will be taken as opposed to the ru­mours of Rs700-800 billion,” he said and added that the Rs170 billion will have to be recovered within four months in this fiscal year. He clarified that the government would not impose General Sales Tax on oil products.

He clarified that taxes would indirectly burden the common man. To impose the taxes, the government would introduce a finance bill or ordinance, de­pending on the situation at the time, he said. If both houses of the parliament were in session at the time, then a bill would be presented, otherwise, an ordi­nance would be promulgated, he said. The Finance Minister said that the government would also implement the agreed-up­on energy reforms through the federal cabinet. Primary focus would be on minimising untar­geted subsidies and reducing the “flow” in the gas sector to zero so that there was no addi­tion to the circular debt.

Ishaq Dar informed that the government had already ful­filled the commitment to raise the petroleum development levy (PDL) on petrol to Rs50 per litre whereas the PDL on die­sel would also be raised to Rs50 per litre from Rs40 per litre by Rs5 each in next two months.

“We have agreed to increase the allocation to the Benazir Income Support Programme (BISP) to Rs400 billion from Rs360 billion currently to [help] the most vulnerable people hit by inflation.”

The Finance Minister said the country’s generation cost was around Rs3 trillion while only Rs1.8 trillion were recovered, which resulted in an increase in either the circular debt or fiscal deficit. However, the entire dif­ference in amount would not be recovered by increasing the tar­iff, he said.

Talking about the foreign ex­change reserves situation, the minister said commitments with friendly countries would be fulfilled and inflows would be received. “There is nothing to worry about. This country has also survived on $414 million in foreign reserves. “The State Bank is managing,” he assured.

Dar said there was a credibil­ity gap as the IMF did not trust the government because of the PTI government’s actions. “They say not only did the previ­ous government not implement the agreement but also reversed when the vote of no-confidence was brought [against Prime Minister Imran Khan].

The incumbent government was implementing the one signed by former prime minis­ter Imran Khan with the IMF in 2019-2020. He reiterated that the Shehbaz Sharif-led govern­ment is holding talks to reach the agreement as a “sovereign commitment”. “This is an old agreement which had been sus­pended and delayed previously,” he noted.

Meanwhile, the IMF has also issued a statement. An Inter­national Monetary Fund (IMF) mission led by Mr. Nathan Por­ter visited Islamabad during January 31 – February 9 to hold discussions under the ninth re­view of the authorities’ pro­gram supported by the IMF Extended Fund Facility (EFF) arrangement.

At the end of the visit, Mr. Por­ter issued a statement: “The IMF team welcomes the Prime Minister’s commitment to im­plement policies needed to safe­guard macroeconomic stability and thanks the authorities for the constructive discussions.

“Considerable progress was made during the mission on policy measures to address domestic and external imbal­ances. Key priorities include strengthening the fiscal posi­tion with permanent revenue measures and reduction in un­targeted subsidies, while scal­ing up social protection to help the most vulnerable and those affected by the floods; allowing the exchange rate to be mar­ket determined to gradually eliminate the foreign exchange shortage; and enhancing ener­gy provision by preventing fur­ther accumulation of circular debt and ensuring the viability of the energy sector. The timely and decisive implementation of these policies along with reso­lute financial support from of­ficial partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable devel­opment.

“Virtual discussions will con­tinue in the coming days to fi­nalize the implementation de­tails of these policies.”