WASHINGTON/ ISLAMABAD: The International Monetary Fund (IMF) has agreed to increase the size of its$ 6 billion loan programme by$ 2bn and extend it for another time to mount up Pakistan’s balance of payments position and foreign exchange reserves.
Finance Minister Miftah Ismail said on Sunday that Pakistan had asked the IMF to enhance its bailout package from the remaining$ 3bn to$ 5bn.
Addressing a news conference at the Pakistan Embassy in Washington, the minister said that the IMF will shoot a staff-position delegation to Pakistan for addresses this request. Specialized addresses on Pakistan’s offer are anticipated to begin on Tuesday.
“ We hope that the staff- position agreement on the enhanced programme will be concluded soon,” Mr Ismail said. Still, he couldn’t say if the coming tranche of about$ 1bn would reach Pakistan before the coming budget.
The decision, still, is subject to a complete reversal of lately assessed subventions and other measures for the forthcoming budget.
Tiered pullout of subventions
The IMF had acceded to give space to the new government to “ insure junking of lately assessed subventions as soon as possible”, a elderly functionary said.
He said everything committed by the former government with the IMF would be revived with repairs for the slippages along with fresh fiscal support and time for reforms.
At present, the government is furnishing about Rs21 per litre out-of- fund subvention on petrol, Rs51.52 per litre on diesel, and Rs5 per unit on electricity.
On Friday, Mr Ismail agreed with IMF recommendations to reduce energy subventions and end a business duty remittal scheme.
At Sunday’s news conference, Mr Ismail and Minister of State for Finance Ayesha Ghaus Pasha explained that the government had no option but to withdraw the subventions, but it would do so in a way that didn’t burden the ordinary people.
The finance minister suggested that the government would do so “ in a staggered way”, intimating at the possibility of fixing two sets of rates, one for the poor and the other for those with big buses.
For case, he said, the government could fix a share for motorcyclists, who would be handed petrol at subsidised rates but there would be no subvention for big buses.
“ I get a subvention of about Rs1, every time I fill my tanks. Why should the government pay for Miftah Ismail?” he asked.
Mr Ismail said the coming month the government would have to pay about Rs96bn as energy subvention, which “ can not be justified”.
Another possibility, he said, was allocating further finances for programmes like the Benazir Income Support Programme.
SBP autonomy
Mr Ismail also indicated that the autonomy the former government gave to the State Bank would not be withdrawn. “ We’ll not do anything that irks the IMF,” he said.
When asked how the government would keep the frugality under the present situation, he said “ We’ll do so by perfecting the debt-to-GDP rate, by enhancing the GDP.”
Mr Ismail said that despite the current government’s differences with Imran Khan, “ we will take full responsibility for all his commitments, all autonomous guarantees he made, whether those are CPEC loans or IMF loans.”
Both Mr Ismail and Ms Pasha said that they anticipated the reserves to ameliorate by coming week.
The finance minister also disbanded the print that the current fiscal crunch could force Pakistan to overpass. “ We can assure you there will be no dereliction,” both said in formerly voice. “ Pakistan has been facing these situations for the last 75 times and we didn’t overpass,” Mr Ismail said.
The finance minister entered a call from Prime Minister Shehbaz Sharif during the news conference and latterly told the media that he was asking about his addresses with the IMF and World Bank officers. “ He’s veritably strict,” said the minister when asked if the PM got upset with him.
Asked if the coming budget would be people-friendly, Mr Ismail said “ We’ll say it’s and the opposition will say it’s not.”
Improvement of EFF
High-position government sources told Dawn the agreement to increase the loan size and duration was reached in principle during Pakistan’s profitable platoon’s meeting with the IMF operation on the sidelines of the IMF-World Bank periodic spring meetings.
The revised package would enable the government to follow up with IMF- supported reforms until the coming choices.
In 2019, the Fund had approved a$ 6 billion loans over three times for Pakistan, but disbursement has been braked by enterprises about the pace of reforms.
The 39-month Extended Fund Facility (EFF) — handed to countries facing serious payment imbalances because of structural impediments or slow growth and an innately weak balance-of-payments position — was to end in September this time, but three tranches of about$ 3bn are still outstanding.
The EFF would now continue until September coming time with$ 5bn support and may lead to larger installments — for case,$1.5 bn in June-July rather of$ 1bn due last month.
Budget precedences
The Fund has also set a condition to authenticate the factual financials for the current financial time to ascertain how important these have swerved from the targets agreed with the IMF in December 2021, when the programme was revived under former finance minister Shaukat Tarin.
Officers said the gap was about Rs1.3 trillion grounded on relief measures blazoned by former high minister Imran Khan besides other slippages.
The IMF has also asked the authorities to minimize the divagation that surfaced, particularly after the Feb 28 subvention package, by financial tightening and profit measures to make up for some of the subvention and the diversions from December agreements.
These would be the areas that the authorities would have to work out details and set in stir well before the IMF charge comes to Islamabad by the middle of the coming month to restate these understandings into a Memorandum of Economic and Financial Programs (MEFP) for formal signing.
On top of that, the IMF has also linked the blessing of the revised bailout package to a mutually agreed overall budget strategy paper for the coming financial time that would also be part of specialized- position conversations.
