Pakistan inches closer to IMF funding

Global lender’s reaction to new budgetary measures expected soon

ISLAMABAD:

After revising the budget in line with the International Monetary Fund’s demands, Pakistan expects progress towards securing the 9th review programme by receiving a Memorandum for Economic and Financial Policy (MEFP), sources said on Monday.

The sources said that soon after the approval of the MEFP, the staff-level agreement and an IMF board meeting was likely to be held.

According the sources, the IMF reaction to the budgetary measures was expected in a day or two.

They said that Pakistan requested the IMF for relaxing the condition of external financing of $6.5 billion. In return for the leniency, the government offered to levy more taxes.

The progress towards the ninth review, the sources said, came after a meeting between Prime Minister Shehbaz Sharif and IMF Managing Director Kristalina Georgieva, in which both sides agreed to resume the bailout package.

The finance ministry officials said that a strategy to cut government expenses by Rs85 billion had been prepared. The government had also accepted a condition of the IMF by introducing reforms in pensions.

According to the MEFP, the proposal for remittances up to $100,000 without declaring the source of income had been withdrawn; rate of income tax on salaries had been increased; the ban on imports had been lifted; and the petroleum levy had been increased to Rs60 per litre.

Meanwhile, the dollar remained stable because of expectations of an early staff-level agreement with the IMF after approval of the revised budget that largely met the IMF conditions.

Earlier, there were concerns that the available foreign exchange reserves plummeted to $4 billion only while the demand had soared to $8 billion. However, expectations of a breakthrough and the cooperation for friendly countries stopped the dollar's flight.

The dollar closed at Rs286.70 with a decrease of three paisas after limited volatility in the interbank market. The greenback closed unchanged at the level of Rs291 in the open market.

The National Assembly passed the Finance Bill 2023-24 on Sunday with certain amendments to the proposed budgetary measures with the revised outlay of Rs14.48 trillion.

The new measures included Rs215 billion additional taxes through amendments to the original bill, which was presented on June 9. The bill set a target of 3.5% growth rate in gross domestic product (GDP).

The house passed the bill, moved by Finance Minister Ishaq Dar, with a majority vote. The house echoed with thumping of the desks as the budget was approved. Now, after the approval of the president, the Finance Act will take effect on July 1.