IMF, govt to bargain over loan conditions
Fund likely to ask for withdrawal of subsidies, increase in tax revenue.
Pakistan is seeking a fresh loan amounting to $4.5 billion, in order to finance debt servicing on existing loans. ILLUSTRATION: JAMAL KHURSHID
ISLAMABAD:
Past performance and an ambitious budget are likely to haunt Pakistan when its newly elected government starts negotiations with the International Monetary Fund (IMF) for a new bailout programme on Wednesday (today).
With a looming balance of payments crisis and a burgeoning budget deficit, the bailout package is seen as necessary for bringing the economy back on track.
Finance Minister Ishaq Dar has already stated that Pakistan will negotiate the programme with the IMF but has insisted that an agreement would be on terms of the borrower, not the lender.
The IMF team, being led by its Washington-based mission chief for Pakistan Jeffery Franks, is pegged to begin the long haul negotiations expected to last for the next fifteen days and aimed at reaching a broader agreement over the contours of the new programme, reveal finance ministry officials.
If a broader agreement is reached, the IMF’s executive board will consider Pakistan’s request for the programme in August. This will be the 19th such arrangement in the last 65 years, during which repeated failures to deliver on promises has created suspicions about the country’s willingness to deliver on tough adjustments.
According to former secretary finance Abdul Wajid Rana, the total financing gap for the next three years is expected to be $11 billion.
Under the bailout programme, Pakistan is seeking a fresh loan amounting to $4.5 billion, in order to finance debt servicing on existing loans.
Additional financing needs equalling $6.5 billion are expected to be met by the World Bank, Asian Development Bank and Islamic Development Bank, subject to the signing of the IMF agreement.
The three broad areas likely to decide the fate of the new IMF programme will be: deep fiscal adjustments to reduce the budget deficit, increased revenue generation, and energy sector reforms coupled with a withdrawal of subsidies.
Published in The Express Tribune, June 19th, 2013.
Past performance and an ambitious budget are likely to haunt Pakistan when its newly elected government starts negotiations with the International Monetary Fund (IMF) for a new bailout programme on Wednesday (today).
With a looming balance of payments crisis and a burgeoning budget deficit, the bailout package is seen as necessary for bringing the economy back on track.
Finance Minister Ishaq Dar has already stated that Pakistan will negotiate the programme with the IMF but has insisted that an agreement would be on terms of the borrower, not the lender.
The IMF team, being led by its Washington-based mission chief for Pakistan Jeffery Franks, is pegged to begin the long haul negotiations expected to last for the next fifteen days and aimed at reaching a broader agreement over the contours of the new programme, reveal finance ministry officials.
If a broader agreement is reached, the IMF’s executive board will consider Pakistan’s request for the programme in August. This will be the 19th such arrangement in the last 65 years, during which repeated failures to deliver on promises has created suspicions about the country’s willingness to deliver on tough adjustments.
According to former secretary finance Abdul Wajid Rana, the total financing gap for the next three years is expected to be $11 billion.
Under the bailout programme, Pakistan is seeking a fresh loan amounting to $4.5 billion, in order to finance debt servicing on existing loans.
Additional financing needs equalling $6.5 billion are expected to be met by the World Bank, Asian Development Bank and Islamic Development Bank, subject to the signing of the IMF agreement.
The three broad areas likely to decide the fate of the new IMF programme will be: deep fiscal adjustments to reduce the budget deficit, increased revenue generation, and energy sector reforms coupled with a withdrawal of subsidies.
Published in The Express Tribune, June 19th, 2013.