Govt to hold talks with IFIs for floods assistance after damage assessment

ISLAMABAD: State Minister for Finance and Revenue Dr. Ayesha Ghaus Pasha has said that the government will hold talks with International Financial Institutions (IFIs) including the IMF for economic assistance after assessing the damage caused by the flood.

She stated this while briefing the National Assembly’s Standing Committee on Finance which met under the chair of Qaiser Ahmad Sheikh.

Ayesha Pasha said that Pakistan has received $3.9 billion so far under the IMF program while another $2.6 billion would be provided by June next year. The chairman committee questioned the State minister on what conditions the IMF agreement was made.

Committee member Syed Hussain Tariq questioned those who are making money from rising dollars. Another member of committee Burgess Tahir said what are the conditions due to which the growth of the economy is not increasing.

State minister for finance replied that when our government took the reign, the external resources of the country were so low that they were not able to meet the needs without going into the IMF program, so the restoration of the IMF program was a priority. The IMF will conduct the ninth review in late November or early December, she replied.

She also said that we have made an agreement with the IMF for the imposition of petroleum levy but the most important was to save a nuclear power from bankruptcy are by making difficult decisions. If we did not take difficult decisions, the country would have gone into a lot of trouble, she added.

The IMF conditions include giving the management plan to reduce the circulating debt, the Public Finance Management Act, the Single Treasury Account, the State Bank Act, the law to protect against losses in government institutions, anti-money laundering and tax-related provisions, she explained.

She also said that the IMF reinstated the program based on the conditions included tax reforms in the 2022-23 budget, generation of provincial surplus and increasing the energy prices. The condition also included withdrawing the petrol subsidy given by the previous government.

She said that there are five conditions for the upcoming 9th review which include increase in electricity prices, not giving tax amnesty, discouraging the culture of tax evasion and generating a Rs153 billion primary surplus budget.

The state minister also informed that the burden of additional taxes will fall on the rich and the expenditure will be controlled through the austerity program.

BISP’s budget of Rs 364 billion will not be reduced and the government will not borrow directly from the State Bank, while spending on health and education will not be reduced, she added.

The federal government has assured to implement the 14 structural benchmarks set by the global lender during 10th and 11th review talks till June next year.

Dr. Pasha, while denying the rumours regarding the promulgation of a mini-budget, highlighted that the government hasn’t planned to bring a mini-budget as yet. However, the government could revise the Public Sector Development Program (PSDP) in case of a surge in expenditures.

While shedding light on the economic loss caused by the recent floods, Dr. Pasha said that the ground realities of Pakistan have changed as a result of the floods and the government is currently estimating the damage caused by the flood and the government will hold talks with multilateral and bilateral international institutions including the IMF for economic assistance after assessing the damage caused by the flood.

She mentioned that the coalition government will achieve an annual tax target of more than Rs 7.4 trillion despite the flood situation in the country. Criticizing the PTI government, the minister highlighted that they had violated agreement with the IMF. 

Contrary to the assurance given to the IMF, the budget deficit exceeded Rs 1.6 trillion during the fiscal year 2022. However, the incumbent government has committed with the IMF to achieve a primary budget surplus target of Rs 153 billion, she added.

Member Operation NDMA told the committee that Balochistan has received 436 percent more rains and Sindh 465 percent and the pattern of rains in monsoon has changed. He said that due to floods and rains, 1508 deaths have been reported so far.

Similarly 12418 kilometers of national highways have been badly affected and 390 bridges have been destroyed  while more than 1.8 million houses have been destroyed due to floods.

While discussing the Effects of high inflation during the current fiscal year and rising dollar rate, the Committee directed the State Bank to keep a vigilant eye on their rising trend. The Committee was of the view that the State Bank should exercise its authority and control the problems.

The Chairman Standing Committee said that an increase in interest rate was not a solution to control inflation besides inflow of dollars should be encouraged through exports.  

The Committee was apprised by the Deputy Governor State Bank that inflation was a huge problem and in order to address it, its root causes had to be addressed. 

He said that global increase in prices of commodities and natural calamities had affected the supply chain. He also apprised about the increase in interest rate, restriction on import of luxury items and facilitation to the exporters/importers. 

Apprising about the increase in the rate of dollar, he said that the SBP does not fix the price of dollars and it is based on the market.

He said that the State Bank had taken various administrative measures to check the price of dollars in the open market.

He also informed that there was a significant difference between outflow and inflow of dollars.