$1.1b loan: Islamabad honoured all commitments to IMF, says Dar

Finance minister hopeful of approval in December 17 meeting.

ISLAMABAD:

Despite growing uncertainty over the collection of tax revenues due to falling oil prices, Pakistan has met all prior actions including appointments of two heads, paving way for the approval of $1.1 billion loan tranche by the International Monetary Fund (IMF). 

Till the November 30 deadline, the government fulfilled five actions that it had to take before the scheduled IMF Executive Board meeting, announced Finance Minister Ishaq Dar on Tuesday. He said it was now expected that the IMF Board will clear the $1.1 billion tranche in its December 17 meeting.

Pakistan and the IMF had concluded staff level talks last month and agreed to take the case for the release of next tranche to the Board only after Islamabad met the outstanding conditions. Dar said these five actions pertained to increasing the Net International Reserves held by the State Bank of Pakistan, reducing net domestic assets and government borrowings.

Dar said under the conditions, the heads of National Electric Power Regulatory Authority (Nepra) and Director General of Debt Management Office were also appointed. However, the latest statement is contrary to the earlier one that Dar gave after the conclusion of talks in which he had said that the IMF had not imposed any prior action for the approval of the tranche.

With the expected release of the next tranche, the government will be able to increase the gross foreign currency reserves to over $15 billion before the end of this month. Dar said the $1 billion from the issue of Sukuk bonds will be received on Wednesday (today).

As the government manages to temporarily overcome challenges of building foreign currency reserves, it is faced with another challenge of steep shortfall in tax revenues due to continuous leakages and falling oil prices.  Dar said due to reduction in oil prices, there will be a minimum Rs60-billion shortfall in tax revenues. For the current fiscal year, the government has approved a Rs2.810-trillion target. In the first five months of the fiscal year, the government was facing a shortfall of Rs75 billion in collection as it could raise only Rs903 billion in taxes. Dar said at the moment the government was contemplating on how to overcome the shortfall.

The government has already assured the IMF that it will take necessary contingency measures including the withdrawal of sales tax exemptions and cut development spending in case revenue collection falls short of the target.

Pak-Russia ties

Dar said in pursuance of “open foreign policy” the government has decided to enhance its economic and commercial ties with Russia.

He said both the sides recently agreed to collaborate in the fields of defence, trade, economy, science, technology, agriculture, education and culture to gain new impetus due to continuous high-level interaction between the leadership of the two countries.  He said, in response to Russian offer for $1 billion loan for Pakistan Steel Mills (PSM), Pakistan has offered Russia to become an equity partner in the PSM. He said Russian side was willing to extend a loan to PSM and other state-owned projects.

Dar said Russia’s decision to ban import of agriculture imports from European Union has provided opportunity for Pakistani agriculture exporters. He said Pakistan expressed the hope for early registration with the concerned Russian authorities of Pakistani exporters of meat, dairy, poultry, sea food, fruits and vegetables as it would facilitate an increase in Pakistan’s exports of food and agri-products to Russia.

He said both the countries have agreed for cooperation in oil and gas exploration, construction of floating LNG terminals, North-South Gas Pipeline from Gwadar To Nawabshah, sharing of seismic and geological data and enhanced oil recovery. Dar said Pakistan has also sought Russian investment in the Diamer Basha dam.

Published in The Express Tribune, December 3^rd, 2014.

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