ISLAMABAD: The International Monetary Fund (IMF) has informed the Pakistani economic team that it will continue virtual discussions in the coming days to finalize the implementation details of policies such as revenue measures, untargeted subsidies, market determined exchange rate and preventing further accumulation of circular debt.
IMF in its statement stated that an IMF mission led by 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.
“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 un-targeted 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,” it concluded.
Earlier, this morning, Finance Minister Ishaq Dar in a news conference said that the government would impose Rs 170 billion fiscal measures through taxes as part of the prior actions of the 9th review of the IMF programme. Â
Finance minister said everything was mutually agreed after which the Fund’s courtesy call was also arranged with Prime Minister Shehbaz Sharif through the Zoom meeting and the premier reiterated commitment to implement the agreed reforms.
He said that reforms in the energy sector included to stop flow of circular debt, minimizing untargeted subsidies, and the flow of circular debt in the gas sector to be reduced to zero from Rs 260-270 billion.
Dar said that fiscal measures would be introduced through Ordinance or Bill in the Parliament. Dar added that the commitment of petroleum levy has almost been fulfilled except Rs10 per litre increase on diesel – to Rs 50 from Rs 40 – ad this would be increased in two instalments of Rs 5 each from March and April, adding that sales tax on petroleum products was not agreed with the Fund.
The Finance Minister said that after reaching an agreement on board contours of the review, draft MEFP is provided to Pakistan and he would go through it ahead of a virtual meeting with the Fund on Monday. He said that Pakistan would be disbursed US$ 1.2 billion once the review is approved by the Executive Board meeting of the IMF.
Replying to the question, the finance minister said that the lifeline consumers would not be burdened through electricity tariff adjustment. He added that reforms in some sectors is in the interest of the country and added that power sector is one of them whose recovery is Rs 1800 billion against the generation cost of Rs 3000 billion, he said adding that out of gap Rs 550 billion is included as subsidy in the budget and remaining Rs 650 billion has to park either in fiscal deficit or somewhere else.   Â
The Finance Minister said that the government would increase BISP allocation by Rs 40 billion to Rs 400 billion for the vulnerable from existing Rs 360 billion. He said that the government is implementing the Fund programme signed by the previous government in 2019. He said that debt servicing has increased from Rs 1750 billion to Rs 5 trillion in the last five years and held the previous government responsible for the current situation.
In replying to a question about foreign exchange reserves, he said that friendly commitments from friendly countries would materialize and some payments made would be rolled over once the programme is finalized. Additionally, he said that the privatization process of power plants, Hewali Bahadur Shah and Balloki, is on track and the prime minister has also chaired meetings on their privatization. Â
Finance minister accused the previous government of Pakistan Tehreek-e-Insaaf of creating credibility issues by reversing the measures, which were agreed with the IMF when a vote of no confidence was moved against it.
