-Finance Minister says IMF mandates imposition of further Taxes prior to deal
-Claims some IMF-advised Reforms are in Pakistan’s favour
-Assures depleting forex reserves would be boosted
-Says govt resolved to complete IMF programme
-Reveals Pakistan will get $1.2 billion after the approval of IMF’s Executive Board
-Virtual discussions will continue to finalise implementation of policy measures, says IMF
Staff Report
ISLAMABAD: Hours after the International Monetary Fund (IMF) issued a statement on its talks with Pakistan, Finance Minister Ishaq Dar said the parleys with the global lender ended “positively”; however, the government would have to impose Rs170 billion in taxes through a mini-budget to revive the loan programme.
Addressing the media, the finance minister confirmed that the government had received the draft of the Memoran-dum of Economic and Financial Policies (MEFP) from the Washington-based lender. At the start of his media talk, the finance minister reminded that the programme the incumbent government was im-plementing was the one signed by former prime minister Imran Khan with the IMF in 2019-2020. He reiterated that the Shehbaz Sharif-led government was holding talks to reach the agreement as a “sovereign commitment”.
“This is an old agreement which had been suspended and delayed previously,” he noted.
Coming on to Pakistan’s talks with the IMF mission, the finance minister said that the 10-day-long discussions were extensive covering the power, and gas sectors as well as the fiscal and monetary side.
“The SBP governor and officials from different departments and ministries participated in the talks,” said Dar.
Sharing broad contours of the understanding reached with the IMF, the finance minister said taxation measures of Rs170 billion will be taken as opposed to the rumours of Rs700-800 billion.
Dar said that the Rs170 billion in taxes will have to be recovered within four months in this fiscal year.
Dar said reforms in the energy sector will be implemented and the main thrust of it is to check the flow of the circular debt. He said the circular debt in the gas sector will be brought to zero while untargeted subsidies will be minimised.
The finance minister said that some of the reforms suggested by the IMF are in Pakistan’s favour.
Dar emphasised that reforms are needed in Pakistan, adding that Prime Minister Shehbaz Sharif has assured the IMF that the government would implement them.
As per the standard procedure, a MEFP and a letter of intent are given. “The government has received the MEFP draft this morning and we will go through it on the weekend. A virtual meeting with the IMF will be held after that on Mon-day,” he added.
“We believe that there are some sectors that need to be reformed in Pakistan’s interest,” he said. The finmin said that the economy is bleeding and now it’s ranked at 47.
He blamed those who misgoverned and mishandled leading to economic devastation, urging that it needs to be fixed.
Talking about the power sector, Dar said that Rs3,000 billion are spent on electricity generation but its recovery is just Rs1,800 billion.
“Even though these reforms are painful but we will have to implement them,” he maintained.
He said that the government had decided that Pakistan will complete the IMF’s programme for the second time. “Pa-kistan will get $1.2 billion after the approval of IMF’s Executive Board.”
He said it has been decided to increase the budget of the Benazir Income Support Program (BISP) by Rs40 billion to Rs400 billion in order to reduce the burden of inflation on the most vulnerable segments of society.
On the depleting forex reserves, the minister assured that they will be boosted. He said that the State Bank of Paki-stan (SBP) is managing it, adding that there are some commitments made by friendly countries.
“Pakistan had made big repayments to countries during this time, and once the programme is finalised, we will get the amount back,” said Dar.
Dar blamed the previous government for the credibility gap, saying that the IMF doesn’t trust Pakistan as not only the country failed to implement the reforms but reversed them at the time of the no-confidence motion.
“This has negatively portrayed Pakistan’s image and this has affected the recent talks as [the IMF] is not sure if we would agree to it,” he added.
He added that the government refused to impose sales tax on petrol and the IMF conceded to it. “It was mutually agreed that there will be no sales tax on petroleum products,” he said. He added that the general sales taxes will be added to the Rs170 billion.
On the other hand, IMF Pakistan Mission Chief Nathan Porter said in a statement while thanking the authorities for the “constructive discussions” that “virtual discussions will continue in the coming days”.
The statement, issued after the mission concluded its 10-day Pakistan visit, welcomed Prime Minister Shehbaz Sharif’s commitment to implement policies that are required to “safeguard macroeconomic stability”.
Porter noted that “considerable progress” was made during the talks with Pakistani officials on “policy measures to address domestic and external imbalances”.
The IMF mission chief highlighted that the “key priorities include strengthening the fiscal position with permanent revenue measures and reduction in untargeted subsidies, while scaling up social protection to help the most vulnera-ble and those affected by the floods; allowing the exchange rate to be market determined to gradually eliminate the foreign exchange shortage; and enhancing energy provision by preventing further accumulation of circular debt and ensuring the viability of the energy sector”.
“The timely and decisive implementation of these policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development,” said Porter.
The IMF mission chief said that the “virtual discussions” will continue between the two sides in the coming days to fi-nalise the “implementation details” of the policies.
