Govt ready to meet all IMF demands to revive loan programme
• Wants Fund mission to visit Islamabad within next week
• Official says no exit from default without lender’s support
ISLAMABAD: Conveying its willingness to accept all the four major conditions of the International Monetary Fund (IMF), the government on Thursday requested the lender to send its mission to Pakistan at the earliest, preferably next week, to conclude a long-awaited agreement to revive the loan programme.
“We have completed our workings on all four areas on the basis of our interactions on the sidelines of the Geneva conference,” a senior member of the government told Dawn after weeklong consultations, including at least two sessions presided over by Prime Minister Shehbaz Sharif through a video link from Lahore.
“We are ready to move ahead with reforms committed under the programme and we plan to implement all decisions during the course of talks with the proposed IMF mission,” the official said.
Secretary Finance Hamed Yaqoob Shaikh has formally written to the IMF mission chief to visit Pakistan.
Another participant said that the IMF bailout package was a panacea for all challenges Pakistan faced today and there was no other exit route from default, which was the Fund mission had been requested to sit across the table and finalise everything.
He said the reason for not taking the required actions to convince the Fund to field the mission was that all decisions involved significant challenges and unless balanced with countermeasures could further aggravate the situation in an already bruised economy.
With an increase in the central bank’s policy rate to check inflation, the debt servicing cost could go up. Besides, increasing electricity and gas rates would stoke up inflation, he said.
About Rs70-80 billion revenue is being targeted to be charged to banks who had enjoyed lofty profits out of foreign exchange operations but the remaining Rs150bn or so has to be met through other sources like flood levy on imports.
Therefore, the government might take some actions that the IMF find insufficient to meet the target and require additional steps that might not be viable within a short period of time, he said.
Another official said that the government had told the IMF that it was ready to implement decisions in line with Geneva discussions, when the Fund visited Pakistan to conclude a staff-level agreement.
“They are also expected to show some flexibility given the recent engagements and economic challenges posed by the post-floods situation,” he said.
The Fund had four major demands — market-based exchange rate, increase in electricity and gas rates (by almost an average of Rs7 per kW-hour and Rs750 per MMBtu, respectively), and additional taxes to make up for the revenue slippages (by almost Rs100bn by one estimate and by Rs225bn by another estimate) so as to contain the fiscal deficit within the original programme targets with adjustments for flood expenditure.
The thrust of all these measures would not be allowed to flow down to the common people and the maximum burden would be limited to well-to-do sections of society, the government members said.
“We do not have any option anymore not to satisfy the Fund. If talks fail, the mission could go back and simply report no progress, but Pakistan cannot afford this,” an official said.
State Minister for Finance Dr Aisha Ghaus Pasha, who was part of the consultations, said Pakistan had conveyed to the IMF that it was ready to implement reforms as agreed and wanted to settle the outstanding issues.
She said the government wanted to continue the IMF programme in a manner that the common people did not bear the burden of tough decisions.
Published in Dawn, January 20th, 2023