Riyadh signals readiness to provide more credit

Pakistan claimed on Wednesday that it received an indication from Saudi Arabia for additional loans that may help to break gridlock with the International Monetary Fund (IMF) and said that it was not planning to prematurely quit the $6.5 billion programme.

“We have received an indication from Saudi Arabia about getting something,” Dr Aisha Pasha, the Minister of State for Finance, said after attending a meeting of a parliamentary committee, without explaining the loan amount.

She also informed the Senate Standing Committee on Finance that some progress was made a day earlier on a friendly country deposit, saying, “we will soon reach the stage to sign the Staff-Level Agreement with the IMF”.

The IMF has asked Pakistan to arrange $6 billion in additional loans and at least half of those must be materialised before the board meeting. The funds are needed to avoid sovereign default and also increasing the foreign exchange reserves to a level sufficient to back 1.7 months of imports.

Pakistan had told the IMF that it would get $2 billion in additional loans from Saudi Arabia and $1 billion from the UAE to meet the additional financing requirements.

Hamad Obaid Ibrahim Salim Al-Zaabi, Ambassador of the UAE also called on Finance Minister Ishaq Dar. The finance minister highlighted various avenues in which both countries could enhance their existing trade and investment relations, according to the finance ministry handout.

Sources said the IMF wanted the $3 billion to be arranged from a combination of bilateral and commercial loans.

It is obvious that the foreign commercial banks will not lend until there is a staff-level agreement with the IMF, Dr Aisha said while responding to a question after the meeting.

The ninth review talks ended inconclusively on February 9 and since then Pakistani authorities had been claiming to close the deal with the IMF “in few days”.

Their relations soured after Prime Minister Shehbaz Sharif announced Rs50 per litre petrol subsidy on the advice of the Petroleum Division but without the endorsement of the finance ministry.

We are telling the IMF that Saudi Arabia and the UAE will come through for us and because of these two countries, Pakistan would soon reach the staff-level agreement stage, the state minister said. She said IMF was taking time to independently verify that from them.

People and the industry have suffered a lot because of increase in prices of electricity, gas, rupee devaluation and the mini-budget but still the government is not able to conclude a deal with the IMF, Senator Mohsin Aziz of the PTI said.

To a question whether there was a fallback option if the IMF deal does not materialise, Dr Aisha said, “government is not even contemplating without an IMF scenario”.

She once again reiterated that the business as usual approach will not work and the structural reforms will have to be introduced to win the trust of the IMF.

Pakistan’s credibility has become too low in the eyes of the IMF because of the past experiences, thus, the Fund is asking to take prior actions, Dr Aisha said.

She said Pakistan has met all the prior actions and the only remaining touch point is the external financing gap.

Malik Bostan, a representative of the foreign exchange companies, claimed before the committee that he could arrange foreign funds to address Pakistan’s external sector woes.

The exchange companies can provide $1 billion interest-free per month to the government for a two-year period with the help of the overseas Pakistanis, Bostan said. He also demanded a licence for doing Hawala business – which is currently an illegal activity.

Bostan, who was invited by the standing committee, also sought exemption from the condition of CNIC on selling up to $15,000 by the customers.

At a time when the finance ministry is already struggling to restore the IMF programme, an ill-prepared fuel subsidy scheme created more troubles for the Q Block.

Petrol subsidy is the idea of the Petroleum Division and the scheme is not designed yet, Dr Aisha said while responding to a question.

She said the IMF was only in favour of the targeted subsidy. If it is plausible, targeted and executable only then the IMF will not have an issue with the petrol subsidy, the state minister observed.

It seems the minister of state for petroleum prematurely announced the Rs50 per litre subsidy last week in a news conference.

Senator Farooq H Naek of the PPP also criticised the government’s untargeted and highly mismanaged wheat flour scheme, which he said had taken lives of people.

Dr Aisha said the Punjab government could not effectively implement the wheat flour subsidy scheme.