Army chief steps in to shore up hard cash

Phones US Deputy Secretary of State Wendy Sherman to help unlock $1.2b from IMF

ISLAMABAD:

As economic turmoil and depreciating rupee send inflation skyward, Chief of the Army Staff (COAS) General Qamar Javed Bajwa has swung into action, reaching out to Washington to push the IMF to immediately release nearly $1.2 billion Pakistan needs to stave off serious upheaval.

The army chief’s ‘appeals’ to the United States are in tandem with his discussions with Prime Minister Shehbaz Sharif over measures for the restoration of confidence in the economy.

Meanwhile, the civilian leadership has also separately contacted the US’ top diplomat in Islamabad, seeking his help to unlock another $1.4 billion funds from the World Bank and the Asian Infrastructure Investment Bank (AIIB), a top government functionary confirmed to The Express Tribune.

The developments reflect the government’s efforts to prevent the economy from tumbling into a profound economic and financial crisis as the clock is ticking on the government to find a way out of the economic crisis that has badly shaken the markets.

The dwindling economy has caused the rupee to shed its value by 30% or Rs55 per dollar since Shehbaz Sharif came in power in April, also exposing the inexperience of the Sharif administration.

The government sources said a meeting was also held in Islamabad between Prime Minister Shehbaz Sharif and the Chief of the Army Staff General Qamar Bajwa. Finance Minister Miftah Ismail and Minister of State for Finance Dr Aisha Pasha also attended the meeting.

A senior government source said that the meeting discussed the measures to come out of the current severe economic crisis, particularly how to stem the rupee losses that have shaken the foundations of the economy.

The required actions to meet the other conditions of the IMF, including securing $4 billion worth of commitments from the friendly countries for arranging additional loans and sale of assets were also discussed between the civilian and the military leaderships, said the sources.

The government is exploring the possibility of selling stakes in its profitable entities listed at the stock market to the Gulf countries in return for the money. The federal cabinet has already approved a draft government-to-government Transaction Bill 2022 Bill to pave the way for these deals.

The sources said that the meeting was informed that the pressure on the rupee will start easing out from next week, as the latest indicators showed that the imports have significantly reduced due to a host of measures taken by the Finance Ministry and the State Bank of Pakistan.

Read: One last IMF condition

The imports are expected to remain around $4.8 billion this month –down by nearly 36% compared with the preceding month. However, the exports also significantly reduced to around $2.2 billion and the foreign remittances were also expected to remain below $2.4 billion.

Overall, the foreign outflows of the dollars have reduced, which should help take the pressure off the demand for the dollar, the meeting was informed.

Chief of Army Staff General Qamar Javed Bajwa has appealed to the United States to help Islamabad secure an early dispersal of $1.2 billion in funds under the IMF loan programme, Nikkei Asia reported, as Pakistan faces the risk of debt default due to dwindling foreign reserves.

The army chief reached out to the US Deputy Secretary of State Wendy Sherman on a phone call earlier in the week, according to the foreign publication.

The Foreign Office (FO) on Friday confirmed that there has been contacts between Chief of Army Staff General Qamar Javed Bajwa and US Deputy Secretary of State Wendy Sherman.

The sources said that Pakistan-China economic relations were one of the reasons behind a delay in convening the IMF board meeting to approve the loan tranche. The IMF in the past has asked Pakistan to renegotiate the China-Pakistan Economic Corridor energy deals. The IMF denies that it has put such demand but said that all the stakeholders should equally share the burden due to prevailing fiscal constraints.

The Inter-Services Public Relations –the military’s media wing said on Friday that Nong Rong, the Chinese Ambassador to Pakistan called on General Qamar Javed Bajwa, Chief of Army Staff (COAS) at GHQ, today.

During the meeting, matters of mutual interest, defence collaboration, progress on CPEC and regional security were discussed in detail, according to the ISPR.

A day earlier, the representatives of the Chinese power generation companies met with the Finance Minister and demanded to release their Rs260 billion outstanding dues and also open a bank account to save them from the vicious circular debt. The companies’ representatives warned them to close their plants, if the money was not paid to them, as they face serious fiscal constraints.

The IMF has linked the clearance of the Chinese power plants' dues with Beijing’s willingness to renegotiate the terms of energy deals.

Read More: IMF and Pakistan’s trade dilemma

Finance Minister Miftah Ismail met on Friday with the Ambassador of the US Donald Blome in the Finance Ministry and requested him to convince the World Bank to approve two budget support loans.

The Finance Minister requested the US ambassador to influence the WB to approve the $450 million second Resilient Institutions for Sustainable Economy (RISE-II) budget support loan and the $500 million Programme for Affordable Energy (PACE). The RISE-II will also help unlock the same $450 million loan amount by the AIIB, said the sources.

The sources said that the RISE-II was at a much-advanced stage and the government was keen to start loan negotiations.

Pakistan is in dire need of these funds, as these are part of the overall $31 billion projected available financing as against the total requirements of $35.1 billion. Any shortfall against these projected financing will further complicate Pakistan’s case in the eyes of the IMF, said the sources.

In addition to these funds, Pakistan also needs to arrange $4 billion from friendly countries and the issue was also discussed between the civilian and the military leadership. The military has done some spadework to get these funds but things were moving at a slow pace.

The sources said that there are five prior actions for getting a total $900 million loan under the RISE –II. These include Rules of Business following the amendments to the Fiscal Responsibility and Debt Limitation Act to provide legal mandate to the Macro-Fiscal Policy Unit and provide for automatic safeguards in case of breach of ceilings as per the FRDLA and the Provincial Finance Departments to notify regulations for the implementation of the Fiscal Responsibility Laws enacted by provincial assemblies that are consistent with the Federal FRDLA amendments.

The Finance Division will also have to notify the transfer of responsibility for the choice and pricing of retail debt instruments from the budget wing (through the Central Directorate of National Savings) to the Debt Management Office (DMO) and issue detailed rules for the DMO.

The third prior action was that the Provincial Boards of Revenue will issue notifications adopting the FBR valuation tables as their District Collectorate valuation tables to keep property assessment rations at 85 per cent of market value.

The fourth prior action was to absorb Rs73 billion of Power Holding Pakistan Limited (PHPL) debts into public debt stock 1 and refund Central Power Purchasing Agency-Guaranteed (CPPA-G)/ Discos Rs240 billion for overcharged GST.

The Finance Ministry and Provincial Finance Departments are supposed to issue implementing regulations following the approval of the common General Sales Tax law passed by the federal and provincial assemblies to generate a harmonized GST for goods and services across the country. This issue also remains pending.

A Finance Ministry official said that a meeting of the National Tax Council (NTC) has been convened next week to address this issue.