ISLAMABAD - Pakistan would formally request for a $5 billion fresh loan package to the International Monetary Fund (IMF) in policy level talks likely to begin from June 28.
As Pakistan and the IMF are holding technical talks under Post Programme Monitoring (PPM) in Islamabad, the officials of finance ministry, economic affairs division and State Bank of Pakistan briefed the Fund on Monday on budgetary targets and economic situation of the country.
Sources said that government has assured the IMF that it would achieve the budgetary targets for the next financial year. It informed the Fund officials that the country would achieve GDP growth target of 4.4 percent, budget deficit of 6.3 percent and revenue collection target of Rs2475 billion in fiscal 2013-2014.
Pakistan and IMF would hold policy level talks from June 28 wherein Finance Minister Ishaq Dar would lead the Pakistani team and Frank Jeffery would lead IMF delegation. Sources said that Pakistan would formally request for fresh loan of three to five billion dollars from the IMF, as already announced by the finance minister.
Sources said that Pakistan might face tough conditions from IMF like imposition of reformed general sales tax (GST) and increase in power tariff for new loan programme, which would be a challenge for the new government of Pakistan Muslim League-Nawaz (PML-N).
The visiting IMF team has so far taken a ‘soft stance’ on the promised fiscal adjustments of 2.5 percent of GDP by reducing the budget deficit from 8.8 percent in 2012-13 to 6.3 percent in the fiscal year 2013-14. The Fund has extended its visit to Pakistan until July 4 from June 30. The commerce ministry on Monday briefed the Fund on exports target of the country wherein SBP informed about the monetary policy as well as interest rate.
The finance minister was to leave for Dubai on Monday night to attend a two-day conference, which would be held jointly by the US Department of State and the Pakistan’s Ministry of Commerce on June 25-26. He would join the talks with IMF after his return to Pakistan.
Pakistan took $7.6 billion loan in 2008 under the SBA, which was later increased to $11.3billion, but the country was not eligible for the last two disbursements of $3.2billion due to its failure to comply with the performance criteria.
The government failed to bring reforms to the taxation system and the power sector, which became the reason behind of the suspension of the programme. Pakistan has to repay $3.4 to the Fund during the upcoming financial year that would put additional pressure on country’s depleting foreign exchange reserves, which stand at $6.24 billion. Hence, the country would have no option but to seek a fresh bailout package from the IMF to avert default.