File photo of Finance Minister Ishaq Dar, courtesy PID
Finance Minister Ishaq Dar on Friday claimed that talks between the government and the International Monetary Fund (IMF) had ended “positively,” adding that a staff-level agreement would be achieved after virtual talks that are to commence from Monday.
In a press conference convened hours after the IMF issued a brief statement on its mission’s 10-day visit to Islamabad, Dar said the government had received a draft of Memorandum of Economic and Financial Policies (MEFP) from the global lender. “The government has received the MEFP draft this morning and we will go through it over the weekend,” he said. “A virtual meeting with the IMF will be held after that on Monday,” he said, adding that successful talks would lead to a letter of intent from Pakistan, after which a staff-level agreement would be inked. “Pakistan will get $1.2 billion after the approval of IMF’s Executive Board,” he added.
Sharing information on the 10 days of meetings between the IMF mission and Islamabad, the minister said they had focused on the power and gas sectors, as well as the prevailing fiscal and monetary conditions. “The State Bank of Pakistan (SBP) governor and officials from different departments and ministries participated in the talks,” he said. Of the talks, he said, it had been agreed that Rs. 170 billion in additional taxes would be imposed in the remaining four months of the ongoing fiscal year. This, he noted, would not include sales tax on petrol, which the IMF had also conceded. “It was mutually agreed that there will be no sales tax on petroleum products,” he said.
Emphasizing that some of the reforms proposed by the IMF were in Pakistan’s favor, he said the primary goal for the energy sector was to curtail circular debt. Stressing that untargeted subsidies would be minimized and circular debt in the gas sector brought to zero, he lamented that of the Rs. 3,000 billion spent on electricity generation, recoveries only equaled Rs. 1,800 billion. Noting that Prime Minister Shehbaz Sharif had assured the IMF that his government would implement all necessary reforms, he added: “We believe that there are some sectors that need to be reformed in Pakistan’s interest even though they will prove painful.”
According to the minister, the government aims to provide relief to the impoverished by increasing the budgetary allocation for the Benazir Income Support Program (BISP) by Rs. 40 billion to Rs. 400 billion. He also weighed in on rapidly depleting foreign exchange reserves, saying they would soon recover. Claiming that the SBP was managing the situation, he said commitments of support from friendly countries would soon materialize. “Pakistan had made big payments to countries during this time, and once the program is finalized, we will get the amount back,” he claimed. “There is nothing to worry about. This country has also survived on $414 million in foreign reserves,” he added.
‘Not our fault’
Commencing his press conference, Dar reiterated that the IMF program being implemented by the incumbent government had been inked by the ousted government of Imran Khan. Stressing that the current government was proceeding with it because of a “sovereign commitment,” he regretted the trust deficit between the IMF and Pakistan, claiming the lender didn’t trust Islamabad to implement its conditions because it had reversed them previously when Khan was facing a no-confidence vote. “This has negatively portrayed Pakistan’s image and this has affected the recent talks as [IMF] is not sure if we would agree to it,” he said, adding it was difficult to convince a country when a prime minister (Khan) claimed in public addresses that the country was corrupt and in a debt trap.
Finalizing implementation
“The IMF team welcomes the prime minister’s commitment to implement policies needed to safeguard macroeconomic stability and thanks the authorities for the constructive discussions,” said IMF mission chief Nathan Porter in a statement issued after the conclusion of talks in Islamabad. “Considerable progress was made during the mission on policy measures to address domestic and external imbalances,” he said, adding that key priorities included “strengthening the fiscal position with permanent revenue measures and reduction in untargeted subsidies, while scaling up social protection to help the most vulnerable 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.”
Stressing that “timely and decisive implementation” of these policies, as well as financial support from official partners, was critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development, he added: “Virtual discussions will continue in the coming days to finalize the implementation details of these policies.”