IMF urged to ease harsh terms

Pakistan required to increase power tariff, fuel taxes over next six months

ISLAMABAD:

Pakistan on Thursday again urged the International Monetary Fund (IMF) to ease its harsh programme conditions that require the country to further increase electricity prices and taxes on fuel over the next six months in return for the remaining loan of nearly $3 billion.

The reminder was given by Finance Minister Muhammad Ishaq Dar during a virtual meeting with IMF Mission Chief Nathan Porter.

During the first interaction, Porter asked the finance minister about the specifics of any proposal to seek debt rescheduling from the Paris Club to whom Pakistan owes $9.7 billion.

“The finance minister recalled the meeting of Prime Minister Shehbaz Sharif with the IMF managing director during his visit to the US in which the IMF MD vowed to support Pakistan in this difficult situation caused by the flash floods and reconsider the programme conditions,” said a statement issued by the finance ministry after the brief virtual meeting.

The premier urged the IMF head to provide upfront the remaining loan of $3 billion and allow a pause in the increase in electricity prices and petroleum levy for four months.

The purpose of seeking the moratorium on the implementation of these conditions is to ease the inflationary pressures that are hurting every household, irrespective of the level of income.

Under the agreement, Pakistan is required to increase the petroleum levy to Rs50 per litre on all petroleum products. At present, it is charging a levy of Rs37.50 per litre, which means that the tax has to be increased by Rs13.50 per litre amid already high prices.

Similarly, the petroleum levy on high-speed diesel is currently Rs7.58 per litre, which has to be increased by another Rs42.42 gradually till March next year.

The Economic Coordination Committee (ECC) is also scheduled to meet today (Friday) to take up a summary to approve a 51 paisa per unit increase in electricity prices for K-Electric consumers for a period of three months.

It will be the first ECC meeting, to be headed by Ishaq Dar, who will also review a proposal to relax the ban on purchase of computers for the growing size of the cabinet.

Sources said that the IMF mission chief did not give any commitment but said that the IMF was looking into the Pakistani request. Nathan Porter also asked about the specifics of Pakistan’s decision to seek debt rescheduling from the Paris Club.

Read US envoy urges Pakistan to comply with IMF terms

The finance minister informed him that the government was working on the modalities and any final decision would be taken in consultation with the IMF. Pakistan owes $9.7 billion to the Paris Club, including $8 billion to five countries – Japan, Germany, France, the United States and South Korea. Out of this, $1.1 billion is maturing this year.

“The finance minister further reaffirmed the government’s commitment to undertake the reforms envisaged under the programme,” said the statement.

The ministry added that the IMF mission chief extended felicitations to the finance minister on assuming the finance ministry and shared the IMF’s assessment of the challenges facing the economy. He expressed IMF’s support for Pakistan in this hour of need and mentioned the meeting of IMF MD with the prime minister of Pakistan.

The IMF mission chief also discussed the support of international lenders for the country to mitigate the effects of flash floods. The statement said that the finance minister briefed the IMF official on the economic situation caused by the devastating floods that affected infrastructure, crops and the livelihood of people.

Initial estimates suggest that Pakistan might have sustained $28 billion in damages due to the floods while the poverty rate is feared to increase by another 7% to 30%.

The finance minister stated that the government would take measures to reduce the burden on the economy while protecting the vulnerable sections of the population.

He said that the government aimed to address the structural issues so that Pakistan could end its fiscal deficit and move towards sustainable growth.

Pakistan’s external sector position remains vulnerable despite the revival of IMF programme a month ago.

The central bank said on Thursday that during the week ended September 23, 2022, the SBP’s forex reserves decreased $341 million to slightly above $8 billion due to external debt repayment.

A new report of the IMF said that the global lender had augmented Pakistan’s programme size last month.