New bailout in jeopardy: IMF, government stick to their guns

Published: June 29, 2013
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Dar said the IMF’s only concern was that the Rs2.475 trillion target might not be achieved without levying more taxes. ILLUSTRATION: JAMAL KHURSHID

Dar said the IMF’s only concern was that the Rs2.475 trillion target might not be achieved without levying more taxes. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: As Pakistan’s economic managers vowed to protect national interest in its dealings with the International Monetary Fund, the international lending institution is said to have complained about “inconsistency of the country’s budgetary figures” and “ill-preparedness of the Pakistani team”.

The two sides refused to budge on their respective positions in their 10 days of negotiations, indicating that the prospects of reaching an agreement are slim, sources told The Express Tribune on Friday.

The talks might end up on a Post Programme Monitoring (PPM) dialogue until Finance Minister Ishaq Dar addresses the concerns of the IMF team, sources added.

Pakistan and the IMF will commence their policy dialogue on Saturday [today] which will continue till July 2, said the finance ministry spokesperson Rana Assad Amin. He said today’s talks will determine whether Pakistan will formally seek a loan from the IMF.

The Fund’s concerns were more about the inability of the Pakistani team to convince it about the delivery of promised measures than the budgetary measures, sources said. The technical-level team is said to have confused the IMF team about the budgetary projections, they added.

“The government is mishandling the IMF team that may cost it a new programme,” said one source. The government should immediately reconstitute its negotiating team to salvage the talks as a few days are left before the IMF team returns to Washington, he added.

Pakistan is vying for a $4.5 billion IMF package to return the money it has already borrowed besides seeking IMF’s nod for getting another $6.5 billion from the World Bank, the Asian Development Bank, Islamic Development Bank and a friendly country.

The officials negotiating on energy and taxation matters were not even aware of the complications and technicalities of the negotiations, sources said. “They do not understand the language of the IMF,” said one of the senior officials who participated in one of the sideline meetings with the IMF team.

Finance Minister Ishaq Dar, however, stoutly denied reports that his team was not up to the mark. The government, according to Dar, has pitched its best team with the likes of Finance Secretary Dr Waqar Masood and State Bank Governor Yaseen Anwar.

He said it was not anyone’s job to tell us whether our team was experienced or not. The government will not obtain a new IMF programme by compromising national interest.

The IMF has problems with officials of up to the additional secretary level at the finance ministry, FBR officials and surprisingly with SBP officials, sources said, adding that all these could not convince the fund during the technical-level talks.

Sources said that IMF was worried that the SBP was short of $3 billion of reserves that it showed as part of its reserves but borrowed from the commercial banks.

The Fund has serious issues with the SBP policy of defending the rupee by using already declining reserves. So far, it has used over $2 billion to defend the rupee. But the SBP governor was not ready to accept the argument, sources said.

Furthermore, the IMF is also worried about the central bank “changing goalposts” when it comes to the monetary policy. It highlighted that sometimes the SBP targets headline inflation and sometimes energy and food-adjusted inflation when it comes to reducing the discount rate.

Another concern was the inconsistencies in revenue and expenditure estimates, which are also not backed by any framework. The Fund was worried that how FBR would achieve its tax target of Rs2.475 trillion. The finance minister had told the National Assembly on Thursday that the IMF was seeking Rs275 billion in new taxes.

Dar said the IMF’s only concern was that the Rs2.475 trillion target might not be achieved without levying more taxes.

The IMF has also objected to the government’s claim of reducing power subsidies. Again the energy team was unable to convince the IMF about the government’s plan to gradually increase power tariffs, sources said.

According to the finance minister, as a first step towards resolution of the energy crisis, the government on Friday paid off Rs322 billion circular debt.

The IMF was also sceptical about the government’s claim of receiving $1.1 billion under the Coalition Support Fund from the United States. The Fund said the Treasury Department had not confirmed $1.1 billion releases in the new fiscal year, sources said.

They added that the Fund was also worried about the impact of fiscal decentralisation as over 65% of taxes go to the provinces, limiting the ability of the federal government to implement fiscal consolidation plan of 2.5% of gross Domestic product for the next year.

The law and order situation was the other point that the IMF was thinking as it also have implications for revenue generation, particularly in Karachi.

Published in The Express Tribune, June 29th, 2013.

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Reader Comments (42)

  • IMF
    Jun 29, 2013 - 4:21AM

    I don’t know why do we have to take loans from IMF or World Bank. Other Countries also give loans at cheaper rate of interest.
    Saudi Arabia / UAE and the muslim world should be contacted for cheaper loans.
    When countries like France & Japan can give infrastructural loans to India at a very good price, why should we still look at IMF or World Bank.

    Recommend

  • Pakistani Ostrich
    Jun 29, 2013 - 4:30AM

    It is time for the chinese to step up and help us get out of this debt situation and prove that they are, indeed our most trusted/best of our ally. So far the chinese have been paying lip service, its time to walk the walk. In this friendship we have already bent backwards. We have sold ( actually the khakis) ourselves for almost nothing to the chinese by giving gwadar, the mineral rights in balochistan and land access to the warm water and energy resources. Not to mention, we have globally painted ourselves in corner by openly aligning our national interest/future to the chinese strategic plans.

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  • YP Mississauga
    Jun 29, 2013 - 4:45AM

    Sooner or later GOP will eventually agree to IMF terms, they have no choice.

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  • riz
    Jun 29, 2013 - 5:56AM

    Dar sahib No compromise please.
    Why govt need loan, Becoz we do not pay taxes while want to be sovereign. Double standards excist at all levels.

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  • Polpot
    Jun 29, 2013 - 6:29AM

    Dr IMF advises nitter medicine
    ++++++++++++++++++++++
    Avoiding medication may cause further deeper illness.

    Recommend

  • Polpot
    Jun 29, 2013 - 7:04AM

    “New bailout in jeopardy: IMF, government stick to their guns”
    +++++++++++++++++++++++++++++++++++++++
    The IMF is not the US Govt that it can be blackmailed. All this drama is for domestic consumption.
    Beggars cant be choosers.

    Recommend

  • Tahir Ali
    Jun 29, 2013 - 7:20AM

    IMF’s concerns on taxes seem pretty bonafide. fBR has become dysfunction;in fact totally dysfunctional.

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  • Jahalat
    Jun 29, 2013 - 8:34AM

    @IMF:
    educate yourself. IMF gives it to the govt of pk at 0 to 2% interest rate depending upon the conditions agreed upon.
    Qatar recently offered at 4%. Got it?

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  • Tahir Ali
    Jun 29, 2013 - 9:00AM

    Why can Pakistan not access information from Swiss,Singapore,UAE,London etc Banks about the Bank deposits of Pakistani and just tax it as undisclosed income.BUT if they bring back funds to Pakistan, tax it at concessional rates

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  • Tariq
    Jun 29, 2013 - 9:16AM

    Govt of Pakistan if it had sense would tell IMF to take their money and shove it, it should reduce its balance of payments by converting all power plants to Coal, stop importing expensive oil and stop importing cars until it gets better.

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  • BetelQ8
    Jun 29, 2013 - 9:54AM

    Dar Can Not Dare refusing the lenders’ conditions in prevailing circumstances, and soon will budge to IMF team.

    Recommend

  • joy
    Jun 29, 2013 - 10:57AM

    @ Pakistani Ostrich: I fully concur with your views. In fact you should charge Chinese @ $ 100
    per sq. mile ..I am sure that will help improve your reserves besides limiting the size of territory to be administered by the govt. It will be a win-win position for all:)

    Recommend

  • ali ahmed
    Jun 29, 2013 - 11:40AM

    no loan will help us until we change ourself…control corruption..taxing the rich,farm tax,decrease indirect tax

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  • @joy
    Jun 29, 2013 - 12:05PM

    Don’t know why mostly Indians have this sort of reaction whenever Pak China relationship is mentioned. They’re far wealthier than any of our other neigbours with a 7 trillion dollar economy. Makes sense to ask them for aid rather than get tied down with the IMF or strings attached US aid.

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  • salman
    Jun 29, 2013 - 12:46PM

    experienced team khappay khappay

    Recommend

  • B
    Jun 29, 2013 - 1:39PM

    @Tariq:
    ‘Govt of Pakistan if it had sense would tell IMF to take their money and shove it’.
    Well, in the meantime, IMF is telling Pakistan exactly the same thing.

    Recommend

  • sgrr
    Jun 29, 2013 - 2:15PM

    @IMF:
    By merely impersonnation as IMF, one cannot become expert like IMF. I think you need to check which country is going to give you loan, usually no one as the countries are not commercial entities to give loans. And if they do provide they do it on commercial rate i.e LIBOR+—-. The loans from the IMF and the IMF are normally the cheaper one than the other sources as they also put conditions on the countries to ensure the repayment of their loans, and if they declined to offer loan to any country, usually other commercial entities and countries plainly refuse to provide loans. Cheeeeeeeeeer.

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  • sgrr
    Jun 29, 2013 - 2:26PM

    IMF has rightly pointed out the gaps in the existing budget and present condition of economy, however, IMF too has nothing in his kit to correct the situation but the traditional means, like reduce subsidies, increase oil & gas prices etc. I do not remember that any point of time since inception, IMF has given any solution for the betterment of our economy on sustainable basis. The reason is very much clear, the jewish mind prevailing in IMF is always interested in recovery of its loans and interest.

    Yesterday I have given a solution to enhance the tax base as well as tax amount, if implemented in true spirit (a gigantic task) may bring our economy on right path without hurting the poor, lower middle and middle class as it is focussed only the people who have resources to pay taxes.

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  • Assad
    Jun 29, 2013 - 5:21PM

    @Pakistani Ostrich:
    Another Indian!

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  • FactCheck
    Jun 29, 2013 - 5:28PM

    @IMF:

    Simple answer is, India is the second largest growing economy in the world with second largest population and a middle class population larger than China and top five economy on PPP (no, not Pakistan People’s Party).

    Rest, you can figure out when stop comparing yourselves to India.

    Recommend

  • FactCheck
    Jun 29, 2013 - 5:30PM

    @Pakistani Ostrich:

    Dude,

    Chinese is not in the money loosen business like forgiving huge amounts of loan. Pakistan is habitual defaulter of loans. Does this answer your question?

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  • Unbelievable
    Jun 29, 2013 - 5:38PM

    The govt has wasted valuable time doing public pleasing “chest thumping” when it should have spent the time educating the public on why IMF loan is critical and why raising taxes and tightening your belt is necessary. If you default on the IMF loan it will doom whatever economic, energy or employment plans the govt is going to roll out – and your going to default on the $13 Billion IMF loan if you don’t get an IMF bridge loan.

    Recommend

  • FactCheck
    Jun 29, 2013 - 5:39PM

    @Tahir Ali:

    Simple answers:

    Those who are in power need to proceed with such an activity, they will not because it is their money,
    Pakistan must have some economic or other clout for the Swiss to listen and Pakistan does not

    US and even US, EU & UK are finding the Swiss hard to share bank deposit data for taxation. How much luck do you think Pakistan is going to have?

    Recommend

  • FactCheck
    Jun 29, 2013 - 5:43PM

    @@joy:

    You haven’t Chinese strings. Look around Africa and Chinese investments in mining. If you follow the same path soon, Pakistan will have more Hun’a than Paki’s.

    Recommend

  • Rashid
    Jun 29, 2013 - 5:51PM

    @sgrr

    ‘…the jewish mind prevailing in IMF…’

    It’s time to form an Islamic minded IMF.Pakistan can take the lead by making the first contribution to the start up capital fund.

    Recommend

  • Rehan
    Jun 29, 2013 - 6:05PM

    Why can’t China or India can’t help us? Don’t they have a moral obligation to a neighbour in need? When they are so kind far away EU. China gave $43 billion, India $10 billion to bail out EU at the IMF. We need only $4.5 billion.
    http://www.ibtimes.com/china-pledges-43-billion-euro-zone-india-and-russia-10-billion-each-703340

    Recommend

  • Rashid
    Jun 29, 2013 - 6:26PM

    @Assad

    @Pakistani Ostrich:
    ‘Another Indian!’

    Your cryptic response tells me that he is right, and you know that. Right?

    Recommend

  • sgrr
    Jun 29, 2013 - 6:35PM

    @Rashid:
    my dear jewish mind here means leave the principal but to interest. Its seems you became emotional and brought religion into it.

    Recommend

  • unbelievable
    Jun 29, 2013 - 8:10PM

    @Polpot

    The IMF is not the US Govt that it
    can be blackmailed. All this drama is
    for domestic consumption. Beggars cant
    be choosers.

    When has Pakistan been successful at blackmailing the USA? Seem to recall the last attempted blackmail was closing the NATO supply route and most would view that extortion as an unmitigated failure. I do agree that these chest thumping statements are for domestic consumption which is counterproductive.

    Recommend

  • China MF
    Jun 29, 2013 - 10:20PM

    It’s time to form an Islamic minded IMF.Pakistan can take the lead by making the first contribution to the start up capital fund.
    .
    @Rashid: With money from where? IMF?

    Recommend

  • Hedgefunder
    Jun 29, 2013 - 11:59PM

    ” Pakistan’s economic managers vowed to protect national interest in its dealings with the International Monetary Fund, “

    Its time for a serious reality check as to Pakistan’ s ability to meet its obligations and promises! There is serious “Trust Deficit” here !
    Face the facts and they are not good ! Nor will they improve in near future, so the choices are rather simple, but has any GOP actually got the will or ability to tackle or deal with the core issues ?
    That is a million $$$$ question, and the gravy train from Uncle Sam has or will come to end very soon, as your WOT was a sham and been recognised by rest of the world !
    I do not see any major Arab Countries coming forward and offering any alms nor for that matter that very all weather friend !
    So bite the bullet and listen to IMF as they are only lender who may continue to bail the nation out ! Period.

    Recommend

  • Rashid
    Jun 30, 2013 - 2:19AM

    @sgrr

    You are right, I rushed into my opinion. I am sorry. I got carried away by the general mindset I see around. It’s no excuse, just explaing the environment.
    Regards.

    Recommend

  • Pakistani Ostrich
    Jun 30, 2013 - 6:06AM

    @Ass..ad, @Rash..id,
    Pakistani Ostrich:
    ‘Another Indian!’
    Please don’t insult me by calling an indian.

    Dude, china may or may not be the best friend we have ever had, only time will tell, but the fact are:
    – we got many times more help from west/US during the earthquake and the flood than the chinese ever did.
    -The west/US and even SA has paid us (direct grant/aid and market access) handsomely for strategically aligning with them, it is too bad the khakis and politicians got rich from it and poor never benefited.
    – Our trade balance is highly in favor of china, compare this to our trade balance with west/USA.
    – Most of the pakistani immigrate/work/study in the West/USA/MiddleEast than in china now or in foreseeable future! Whatever our foreign balance is because of pakistanis like me living and working in the West/USA/MiddleEast.
    – I know what the ‘friendly’ chinese did/doing to the african nations and their resources in collusion with the african tinpots and generals (sounds familiar?), don’t blame me for being a skeptic.
    – Do you want me list the treatment of our religious ‘brothers’ in china, compared to how they are treated in the west/usa (like many pakistanis i live there, i know better than propaganda being fed).

    ..i can go on and on..on..
    Seems to me you are on khakis gravy train or one us naive (to put it mildly) person who believes china loves us unconditionally. Do you still want to be pimping china? when i speak the truth, why do you feel hurt to the extent that you have to question who i am? are you a chinese agent or ISPR paid spokesman? We should learn from our past experience that there is no such thing free lunch and especially from china! Recommend

  • Pakistani Ostrich
    Jun 30, 2013 - 6:08AM

    @Ass..ad, @Rashid,
    Pakistani Ostrich:
    ‘Another Indian!’
    Please don’t insult me by calling an indian.

    Dude, china may or may not be the best friend we have ever had, only time will tell, but the fact are:
    – we got many times more help from west/US during the earthquake and the flood than the chinese ever did.
    -The west/US and even SA has paid us (direct grant/aid and market access) handsomely for strategically aligning with them, it is too bad the khakis and politicians got rich from it and poor never benefited.
    – Our trade balance is highly in favor of china, compare this to our trade balance with west/USA.
    – Most of the pakistani immigrate/work/study in the West/USA/MiddleEast than in china now or in foreseeable future! Whatever our foreign balance is because of pakistanis like me living and working in the West/USA/MiddleEast.
    – I know what the ‘friendly’ chinese did/doing to the african nations and their resources in collusion with the african tinpots and generals (sounds familiar?), don’t blame me for being a skeptic.
    – Do you want me list the treatment of our religious ‘brothers’ in china, compared to how they are treated in the west/usa (like many pakistanis i live there, i know better than propaganda being fed).

    ..i can go on and on..on..
    Seems to me you are on khakis gravy train or one us naive (to put it mildly) person who believes china loves us unconditionally. Do you still want to be pimping china? when i speak the truth, why do you feel hurt to the extent that you have to question who i am? are you a chinese agent or ISPR paid spokesman? We should learn from our past experience that there is no such thing free lunch and especially from china! Recommend

  • Malik
    Jun 30, 2013 - 8:34AM

    Where can we get IMF flags for burning ?

    Recommend

  • sgrr
    Jun 30, 2013 - 10:11AM

    @Hedgefunder:
    Both parties are here in Islamabad, and playing the nerve game, let’s see who win the game or bargain at the middle.

    Recommend

  • Hedgefunder
    Jun 30, 2013 - 3:44PM

    @sgrr:

    Beggars do not bargain, but accept what is offered ! This is going to be an “Take it or Leave it ” deal, as there are no other options or lending sources for Pakistan.

    Recommend

  • sgrr
    Jun 30, 2013 - 5:13PM

    @Hedgefunder:
    But lenders do not come at the doors of beggar, just wait and see. Every thing will be settled very soon.

    Recommend

  • Rashid
    Jul 1, 2013 - 12:05AM

    @China MF

    @Rashid: With money from where? IMF?
    Please don’t underestimate and taunt us; please. We appreciate your help and respect the Chinese people for that. It’s our fight with IMF, if you can’t help us don’t interfere. We are not a poor country, only poorly managed. We can set up hundreds of camps in Pakistani cities and villages where we can employ madrassa students to collect the hides of animals sacrificed during Eid-ul-Azha to raise funds to pay off IMF.

    Recommend

  • Jocker
    Jul 2, 2013 - 4:57PM

    *we have to fight this war on our own, no comes to rescue noone, this is the reality. We have Great potential, so much to be explored and utilized in the best economic way, if we some how manage to control and shrink corruption we will be in better position than today. without imposing taxes on poor Masses *

    Recommend

  • sgrr
    Jul 5, 2013 - 10:06AM

    @Hedgefunder:
    Now both parties GoP and IMF are happy, they both achieved objectives, i.e. to obtain loan and to give loan. It was the main purpose, remaining all formalities. It was a nerve game wherein both succeeded. And I am sure that next time IMF will again come and offer loan to repay the old ones. They are just interested in that 3% i.e. Interest.

    Recommend

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    My spouse and i admire what you have done here. I love the particular part that you say you are doing this to offer back on the other hand would believe by every one of the comments that is certainly working for you at the same time. Do you have any longer info on this particular?Recommend

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