ISLAMABAD: The government asked the International Monetary Fund (IMF) to send a mission to Pakistan as soon as possible, preferably next week, in order to reach a long-awaited agreement to revive the loan program, indicating its willingness to accept all four major conditions.
After a week of consultations, which included at least two sessions presided over by Prime Minister Shehbaz Sharif via video link from Lahore, a senior government official told Dawn, “We have completed our workings on all four areas on the basis of our interactions on the sidelines of the Geneva conference.”
The official stated, “We are ready to move forward with reforms committed under the program, and we plan to implement all decisions during talks with the proposed IMF mission.”
In a formal letter, Secretary of Finance Hamed Yaqoob Shaikh requested permission to visit Pakistan from the IMF mission chief.
Another participant stated that the IMF bailout package was the only solution to Pakistan’s current problems and that there was no other way out of default other than for the Fund’s mission to sit across the table and finalize everything.
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He stated that failing to take the necessary steps to persuade the Fund to carry out the mission was due to the fact that all decisions involved significant challenges that, if not balanced with countermeasures, could further aggravate an already troubled economy.
The cost of debt servicing may rise if the central bank raises the policy rate to control inflation. In addition, he asserted, rising gas and electricity prices would fuel inflation.
The goal is to collect between Rs70 billion and Rs80 billion from banks that made a lot of money from foreign exchange operations. However, the other Rs150 billion or so must come from other sources, like the flood levy on imports.
He stated that as a result, the government might implement some measures that the IMF determines are insufficient to achieve the goal and necessitate additional measures that may not be feasible within a short period of time.
When the IMF visited Pakistan to conclude a staff-level agreement, another official stated that the government had informed the Fund that it was prepared to implement decisions in accordance with Geneva discussions.
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He stated, “They are also expected to demonstrate some flexibility given the recent engagements and the economic challenges posed by the post-floods situation.”
The Fund had four main demands: a market-based exchange rate, an increase in electricity and gas rates (by almost Rs7 per kW-hour and Rs750 per MMBtu, respectively), and additional taxes to make up for revenue slippages (by almost Rs100 billion, according to one estimate and by Rs225 billion, according to another estimate) in order to keep the fiscal deficit within the original program goals and make adjustments for flood spending.
The members of the government stated that the majority of the burden would be placed on the well-to-do sections of society and that the thrust of all these measures would not be allowed to reach the common people.
We are no longer in a position to defy the Fund. The mission could simply report no progress if talks fail, but Pakistan cannot afford this, an official stated.
Dr. Aisha Ghaus Pasha, the state minister for finance, said Pakistan had informed the IMF that it was willing to carry out the agreed-upon reforms and resolve any outstanding issues.
She said that the government wanted to keep the IMF program going so that ordinary people didn’t have to make hard decisions.