IMF seeks political consensus for revival of $6.5b bailout

Expresses concerns opp may create hurdle in implementation of tough economic decisions


Shahbaz Rana February 01, 2023
According to finance ministry sources, the IMF has not yet responded to the new roadmap shared by Pakistan, showing that initial efforts have not been very successful. Photo: REUTERS

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ISLAMABAD:

The International Monetary Fund (IMF) on Tuesday expressed concerns that the opposition might create hurdles in the way of implementing tough economic decisions, urging the government to meet all the “requirements” for the completion of the much-delayed programme review.

Nathan Porter, the visiting mission chief of the IMF, raised the question about the implication of the opposition’s role in difficult decisions that Pakistan would have to take to avoid the default.

He expressed these concerns during the opening round of 10-day-long talks, according to the government officials.

Finance Minister Ishaq Dar led the Pakistani delegation.

Sources quoted the IMF mission chief as saying that the fund had concerns that the opposition might create some problems in the way of rolling out additional taxation measures that the government was planning to impose to revive the talks.

The government also started work on a plan for increasing the electricity prices.

However, the finance minister assured the IMF mission head that the government believed in political dialogue, the sources said. Dar stated that the government would try to enforce additional taxes in a manner that would avoid any untoward legal and political challenges, the sources added.

The government was planning to promulgate a presidential ordinance but in case the IMF concerns remained, it might bring an act of parliament. Parliament route would take at least 14 days before the new taxes were implemented.

Although former prime minister Imran Khan backed the IMF programme, he, in the past, often changed positions on many issues to take advantage of the prevailing situation. Pakistan was in a dire need of the IMF umbrella to avoid sovereign default but for that it had to take many difficult steps.

Dar also apprised the IMF team about the negative role that Imran played at various occasions in the past to derail the economy.

The IMF mission chief urged the Pakistani authorities that they needed to do a lot to fulfil the programme’s commitments.

“Nathan Porter expressed his confidence that the government will meet the IMF requirements for the completion of the 9th review. Porter hoped that Pakistan would continue towards its progress on the reforms in various sectors and complete the IMF programme within time effectively,” according to the statement.

The IMF programme was going to end in June this year. So far, around $3.5 billion of the $6.5 billion total package remained undisbursed. Pakistan was not yet able to complete the 9th review, which according to the revised schedule had to be completed during the first week of November 2022. The 9th review pertained to the July-September 2022 period but both the authorities would also discuss the results of the October-December 2022 period, which pertained to the 10th review.

At this stage, both the sides had not indicated about clubbing the 9th and 10th reviews that might help unlock another $800 million.

The sources said that the IMF mission chief asked about Pakistan’s plan to bridge the fiscal gap, which emerged against the plan agreed in June last year.

According to the finance ministry, Nathan said: “The IMF and Pakistan will be working together on fiscal reforms.”

The sources said that Dar assured the IMF that Pakistan would take only those measures that could survive the courts’ scrutiny.

The government faced a major setback when the Sindh High Court struck down the super tax, causing at least Rs240 billion hit against the annual target of Rs7.470 trillion.

On his part, the finance minister extended all his support to the mission and “committed to work together for reaching an agreement to complete the 9th review under the Extended Fund Facility (EFF)”, according to the finance ministry.

Esther Perez Ruiz, the IMF resident representative, Minister of State for Finance and Revenue Dr Aisha Ghous Pasha, SAPM on Finance Tariq Bajwa, State Bank of Pakistan Governor Jamil Ahmed and secretary finance also attended the opening round of talks.

The meeting discussed and reviewed the economic and fiscal policies and reforms agenda to accomplish the 9th review under the EFF.

Pakistan had been trying to win back some of the lost ground but due to the trust deficit, the IMF this time appeared determined to get all the actions implemented before reaching a staff-level agreement. The IMF on Tuesday received the update on the assets declaration plan for civil servants.

The finance minister briefed the mission on fiscal and economic reforms and measures being taken by the government in different sectors, including bridging the fiscal gap, exchange rate stability and in the energy sector, for the betterment of the economy.

The finance minister assured that Pakistan would soon roll out a plan to reduce the gas sector’s circular debt by half to around Rs700 billion.

Dar, according to the finance ministry, said that reforms were being introduced in the power sector and a high-level committee had been formed for devising modalities to offset the menace of circular debt in the gas sector.

The sources said that in order to address the power sector issues, the government had proposed to enforce three quarterly tariff increases equal to Rs5.54 per unit from now till June, one additional debt surcharge of Rs2.93 per unit and give effect to the pending fuel cost adjustment.

These measures were being finalised against the Rs952 billion gap between the plan agreed in June and the progress during the current fiscal year.

Dar also extended gratitude to the IMF managing director on continuation of talks and shared that as the finance minister, he had successfully completed the IMF programme in the past and that the government was committed to complete the present programme.

In order to pave the way for the IMF visit to Pakistan, the government last week finally lifted administrative control on the rupee, which closed at Rs268 to a dollar on Tuesday, recovering nearly Rs2 to a dollar after a straight three-day loss of Rs39.

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