PM steps in to break deadlock with IMF

ISLAMABAD:

In a bid to break the deadlock, Prime Minister Shehbaz Sharif on Thursday made a telephonic call to International Monetary Fund Managing Director Kristalina Georgieva and urged her to relax conditions regarding increase in energy prices and imposition of more taxes.

The telephonic contact was made four days before a face-to-face meeting between the prime minister and the IMF head that is expected to take place on the sidelines of the Geneva Conference aimed at seeking relaxations from the global lender.

Sources told The Express Tribune that the prime minister urged the IMF managing director to review the condition about imposition of new taxes. He also sought relaxation in the demand to increase electricity prices to compensate for the deviation of around Rs500 billion from the annual circular debt management plan.

These remain the major stumbling blocks in reaching an initial understanding for a staff level visit by the IMF to Pakistan. “However, the government stood ready to impose flood levy and windfall income tax on commercial banks,” they added.
There was also a resolve from the Pakistani side to increase the energy prices in future against any further deviation. It was not immediately known whether the IMF MD promised to give any concessions.

Meanwhile, Prime Minister Shehbaz also made a call to his Chinese counterpart, Li Keqiang, seeking Beijing’s help to avert a looming default.

Pakistan’s gross official foreign exchange reserves dipped further to $5.6 billion. The prime minister’s call to the IMF head indicates that the finance ministry could not break the gridlock in the past over three months.

In what appeared to be an alternative to the IMF, Finance Minister Ishaq Dar, a day earlier, had expressed the hope of receiving a $3 billion second bailout from Saudi Arabia within days, vowing to raise money through the sale of assets to beef up the critically-low foreign exchange reserves. But the Saudi cash assistance can only delay the default, as it cannot permanently solve the problem.

The finance minister had said that the government was committed to the IMF programme. But at the same time, he added: “We will not take measures that may increase the burden on the common man.”

The IMF had earlier asked for a plan to end the additional Rs500 billion circular debt, increase in energy prices, imposition of new taxes, letting the rupee gain its real value and achieve the primary budget surplus targets, excluding flood related expenses – the conditions that will stoke inflation that is already standing at 25 percent.

Meanwhile, the United Nations on Thursday also held a news briefing to update the media about “International Conference on Climate-Resilient Pakistan” – a name that is different from the one the government had earlier spelled out.

Planning Minister Ahsan Iqbal had described the January 9th gathering as “Donor’s Conference". The exclusion of the word "donor" indicates that Pakistan does not have very high hopes for any major financial support from the world.

The conference had originally been planned to arrange $8.2 billion minimum funds, grants and loans, to help 33 million estimated Pakistanis affected by the devastating floods.

The conference co-hosted by the government of Pakistan and the UN, will take place at the UN Office in Geneva. This high-level conference will bring together public and private sectors leaders, with the aim to generate financial and international support to the communities impacted by last year’s devastating floods in Pakistan, and to rehabilitate and rebuild damaged infrastructure in a climate-resilient manner, said Knut Ostby, the country head of the United Nations Development Programme (UNDP) from Geneva.

"It is a pivotal moment as there are only six months before the next monsoon starts and we expect the donors to announce financial support to Pakistan to start early reconstruction," Osby added.

The flood rehabilitation and reconstruction needs have been documented in the Resilience Recovery and Rehabilitation and Reconstruction Framework (4RF) and half of the needs will be met by Pakistan from its own resources, said Syed Haider Ali, the additional secretary of Ministry of Foreign Affairs while speaking at the press conference.

Pakistan has identified a funding gap of $8.2 billion against the $16.3 billion total flood rehabilitation and reconstruction requirements, according to the 4RF report.

It has assessed that its ability to fund the rehabilitation and reconstruction through federal and provincial budgets was limited to 30 percent or $4.9 billion. It has estimated receiving another 5 percent or $814 million from the community support organisations and 15 percent or $2.5 billion through the public-private partnership (PPP) models.

However, the remaining $8.2 billion or 50 percenr has to come from foreign countries and multilateral creditors, according to the recovery financing strategy. Of the total recovery priority cost of $16.3 billion, the immediate needs for up to one year are estimated at $6.8 billion.

"Let us not get into semantics but it certainly has the element of pledges," said the additional secretary while responding to a question why the word donor was dropped from the title.

Pakistan’s ambassador to the UN Geneva office Khalil Hashmi said that during the past two years different countries also faced their own problems in the shape of many exogenous shocks.

To a question about low response to the UN flash appeals by the world, the UNDP country head said that against two flash appeals, the UN received 30 percent to 40 percent commitments.

The UN secretary-general will deliver remarks at the opening session and is scheduled to hold a joint media encounter with the Prime Minister Shehbaz from a stake-out position.

The 2022 floods in Pakistan affected more than 33 million people, with nearly 8 million displaced and more than 1,700 people killed. More than 2 million houses, 13,000 km of roads, 3,100km of railway tracks and 439 bridges were damaged or destroyed.

An estimated 240,000 people remain displaced from their homes in Sindh. Flood waters continue to recede in many flood-affected areas across Pakistan.

However, standing flood waters continue to be reported in Dadu, Kambar, Shahdad Kot, Khairpur, Mirpur Khas, Jamshoro, Sanghar, Umer Kot, Badin, Shaheed Benazirabad and Naushahro Feroze districts in Sindh and Sohbatpur and Jaffarabad districts in Balochistan.