We have satisfied IMF on $1.5b subsidy: Tarin

Finance Minister Shaukat Tarin on Sunday said the government had satisfied the International Monetary Fund (IMF) on how it would fund a $1.5 billion subsidy package announced by Prime Minister Imran Khan. “The IMF had said it needed Pakistan to explain how it would fund the $1.5 billion subsidy package,” Tarin said during a press conference in Islamabad.

"There are no issues. We have given them the details as to where the funds would come from but they want to see the agreements we have signed [with provinces and state entities for funds]," he added.
“My final talk with the IMF would be held on Tuesday. The IMF should have no reason to stop the next tranche.”

The IMF has begun the seventh review of the $6 billion rescue package agreed with Pakistan in 2019.
Furthermore, Tarin said after the premier’s relief package on electricity rates, consumers saw a decrease in power tariffs by Rs5. “If your electricity bill was Rs1,840 last month, then it would be Rs850 this month,” he added, explaining how the decrease would translate to electricity bills. “More impact will be visible in the upcoming months”.

The minister also commented on February’s current account deficit, which had shrunk to an eight-month low of $0.5 billion. “Expert economists had predicted that the deficit would be $1.5 billion, however, it stands at $0.5 billion,” he added. He maintained that curtailed imports, government efforts, and a change in the exchange rate had all contributed towards it.

The minister said there was a reduction in imports while exports – including service exports – had increased. “Service exports grew from $521m to $547m, while total exports stood at $20.6 billion.”
Tarin told reporters that there was a “slight” increase in remittances as well which moved from $214m to $219m, adding that he expected a higher increase in the upcoming month because of Ramazan and Eid.

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The minister pointed out that people might argue that economic growth was reducing; however, large scale manufacturing [LSM] had grown by 8.2% in January against the same month of the last year and 4.2% against December 2021. He highlighted that the LSM growth was only 1.2% in September 2021.
He maintained that the economy was “strong”, despite international price hike, as suggested by the LSM growth, an increase in the discount rate and a decrease in foreign exchange rates as well as an increase in agricultural and service exports.

He added that State Bank’s reserves stood at $16.6 billion dollars. “So there has not been any hustle and bustle in the reserves as in the past when they had started depleting fast after the high current account deficit.”  . Tarin claimed that current statistics had foreshadowed the target of 4.8% in the Gross Domestic Product (GDP) set for this current fiscal year. “The GDP can potentially grow more than 5%.”
The finance minister also mentioned that Pakistan ranked highest in South Asia on the happiness index, and was in the top 15 in all of Asia.

The minister commented on the “noise” regarding price hike and said this week the sensitive price index (SPI) saw a 1.37% decrease from the previous week. “Currently the SPI stands sat 15.1%, which is a 36-month low. Last month, the SPI was 20.5%.” According to the minister, the decrease came because of a reduction in the prices of chilli powder, lentils, eggs and sugar.

Responding to a question about PML-N leader Miftah Ismail's news conference a day earlier, the minister said the government was not issuing Euro bonds at this time because of a high interest rate.
"As soon as the international markets settle down and the rates become normal, we will issue the bonds." He added that Miftah was wrong in comparing the present current account situation with that in 2018.

“In 2018, Pakistan's foreign exchange reserves were at the lowest level. It only had enough reserves to pay for imports of one month.” In an answer to another question, the minister maintained that the incumbent government would meet its target of wheat growth, which would potentially be 5-6% more than that of last year.

“We might not have to import at all, but if we do it would be for strategic reserves.”
Tarin was also asked about the finance ministry’s plan in the wake of the uncertainty with the ongoing no-confidence motion set in place by the opposition as well as his own plans. Tarin replied that his ministry would plan accordingly.

“However, this uncertainty will not remain because this is a constitutional process which will end in a few days.” The minister also said that he was an elected senator of the PTI. “I will only continue if the PTI government remains. I will not switch to a different government, as I am a man of principles,” he claimed. The minister added that he was not a “lota” (spouted globulars), which had become the PTI’s title for the "turncoats”, who had supported the no-trust move against PM Imran.

(With input from agencies)