wasim-fan
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Question is who can withdraw the subsidies.
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Contact the PP Team
IMF board approves $7bn loan programme for Pakistan [Post Updated #474]
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Kianig89
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Is this even on the agenda of PDM all they are focusing on keeping PTI at bay while economy worsening day by day with Budget looming and huge deficits to cover up and if they increase the oil prices then all scenario will change
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The government has pitched the budget deficit target of 4.8% of the total size of economy, or Rs3.77 trillion, to the International Monetary Fund (IMF) for the next fiscal year, which the global lender wants to be adjusted further through a combination of expenditure cuts and additional revenue mobilisation.
Further discussions with the IMF on fiscal year 2022-23’s budget will begin this week to close the gap and reach a deal in June.
But the new coalition government faces the dual challenge of restoring Pakistan’s credibility in the eyes of international lenders due to the broken past promises and simultaneously winning concessions from them.
Sources told The Express Tribune that during the inconclusive Doha talks, the government had proposed the budget deficit target for the next fiscal year at Rs3.77 trillion, or 4.8% of gross domestic product (GDP).
The primary deficit target, excluding interest payments, had been proposed at 0.5% of GDP, or less than Rs400 billion, for the next fiscal year, they added.
However, the IMF did not accept both the numbers, terming the 4.8% budget deficit projection at the lower end in the absence of concrete measures. It demanded that Pakistan should meet its commitment and generate a primary budget surplus instead of proposing the primary deficit target, they added.
Pakistan informed the IMF that any budget made on the assumption of achieving the primary budget balance would be unrealistic and would result in starting the new fiscal year on a wrong footing, said the sources.
Under the 2019 Extended Fund Facility, the IMF’s key goal is the primary budget target, which in present circumstances can only be achieved through a combination of development expenditure cuts and enhancing revenue collection. However, the gains made through higher revenue mobilisation and development spending cuts are lost by an increase in the key policy rate by the central bank to 13.75%.
Due to the last government’s failure in fulfilling the promises made with the IMF, there was a serious credibility crisis, said Dr Aisha Pasha, the Minister of State for Finance and Revenue. Our success was that we brought the IMF back to the negotiating table and covered significant ground, said Dr Pasha.
The Minister of State said that Pakistan shared the doable fiscal numbers with the IMF and further discussions on these numbers would begin on Wednesday.
Finance Minister Miftah Ismail said on Saturday that after an increase in fuel prices by Rs30 per liter, he was very close to clinching a deal with the IMF. Ismail hoped to finalise the staff level agreement in June, preferably around June 10th budget time.
Pakistan and the IMF have so far held two unsuccessful rounds of talks to reach a staff-level agreement on the completion of the 7th review, first held by the Pakistan Tehreek-e-Insaf government in March and second by the coalition government this month.
The sources said that one of the hurdles in an agreement on the next fiscal year’s framework was the increase in electricity prices and the subsidies needed to bridge the gap. The Ministry of Finance has informed the Power Division that it was ready to provide around Rs740 billion in electricity subsidies for the next fiscal year. The amount is roughly Rs110 billion higher than this fiscal year.
It would still require increasing the electricity prices in the range of Rs10 to Rs12 per unit, including withdrawal of the temporary Rs5 per unit subsidy announced by the last PTI government for four months.
The sources said that the interest payments for the next fiscal year are currently projected at around Rs3.56 trillion or 4.5% of the GDP. But one calculation suggests that the figure could reach Rs3.8 trillion if the central bank further increases the interest rates in July.
For this fiscal year, the estimated overall budget deficit target is 6.5% of the GDP, although the Finance Minister Ismail said that it could cross 8% of the GDP.
For this fiscal year, the estimated cost of the interest payments on the government loans is Rs3.1 trillion. However, the figure may further shoot up due to rupee devaluation and its impact on the foreign debt servicing.
The defense spending for the next fiscal year is projected at less than Rs1.55 trillion, up from nearly Rs1.4 trillion.
The Planning Ministry last week issued budget ceilings to the ministries based on Rs800 billion PSDP for the next year. The higher development spending may further increase the gap between the government and the IMF projections.
The FBR’s revenue target is estimated at around Rs7.2 trillion while another Rs2 trillion could be arranged as non-tax receipts. The Ministry of Finance had initially estimated Rs450 billion as the Petroleum Development Levy target but it was giving a second thought to it, as the government will have to restore the petroleum levy at the beginning of the new fiscal year, starting in July.
Published in The Express Tribune, May 31st, 2022.
Further discussions with the IMF on fiscal year 2022-23’s budget will begin this week to close the gap and reach a deal in June.
But the new coalition government faces the dual challenge of restoring Pakistan’s credibility in the eyes of international lenders due to the broken past promises and simultaneously winning concessions from them.
Sources told The Express Tribune that during the inconclusive Doha talks, the government had proposed the budget deficit target for the next fiscal year at Rs3.77 trillion, or 4.8% of gross domestic product (GDP).
The primary deficit target, excluding interest payments, had been proposed at 0.5% of GDP, or less than Rs400 billion, for the next fiscal year, they added.
However, the IMF did not accept both the numbers, terming the 4.8% budget deficit projection at the lower end in the absence of concrete measures. It demanded that Pakistan should meet its commitment and generate a primary budget surplus instead of proposing the primary deficit target, they added.
Pakistan informed the IMF that any budget made on the assumption of achieving the primary budget balance would be unrealistic and would result in starting the new fiscal year on a wrong footing, said the sources.
Under the 2019 Extended Fund Facility, the IMF’s key goal is the primary budget target, which in present circumstances can only be achieved through a combination of development expenditure cuts and enhancing revenue collection. However, the gains made through higher revenue mobilisation and development spending cuts are lost by an increase in the key policy rate by the central bank to 13.75%.
Due to the last government’s failure in fulfilling the promises made with the IMF, there was a serious credibility crisis, said Dr Aisha Pasha, the Minister of State for Finance and Revenue. Our success was that we brought the IMF back to the negotiating table and covered significant ground, said Dr Pasha.
The Minister of State said that Pakistan shared the doable fiscal numbers with the IMF and further discussions on these numbers would begin on Wednesday.
Finance Minister Miftah Ismail said on Saturday that after an increase in fuel prices by Rs30 per liter, he was very close to clinching a deal with the IMF. Ismail hoped to finalise the staff level agreement in June, preferably around June 10th budget time.
Pakistan and the IMF have so far held two unsuccessful rounds of talks to reach a staff-level agreement on the completion of the 7th review, first held by the Pakistan Tehreek-e-Insaf government in March and second by the coalition government this month.
The sources said that one of the hurdles in an agreement on the next fiscal year’s framework was the increase in electricity prices and the subsidies needed to bridge the gap. The Ministry of Finance has informed the Power Division that it was ready to provide around Rs740 billion in electricity subsidies for the next fiscal year. The amount is roughly Rs110 billion higher than this fiscal year.
It would still require increasing the electricity prices in the range of Rs10 to Rs12 per unit, including withdrawal of the temporary Rs5 per unit subsidy announced by the last PTI government for four months.
The sources said that the interest payments for the next fiscal year are currently projected at around Rs3.56 trillion or 4.5% of the GDP. But one calculation suggests that the figure could reach Rs3.8 trillion if the central bank further increases the interest rates in July.
For this fiscal year, the estimated overall budget deficit target is 6.5% of the GDP, although the Finance Minister Ismail said that it could cross 8% of the GDP.
For this fiscal year, the estimated cost of the interest payments on the government loans is Rs3.1 trillion. However, the figure may further shoot up due to rupee devaluation and its impact on the foreign debt servicing.
The defense spending for the next fiscal year is projected at less than Rs1.55 trillion, up from nearly Rs1.4 trillion.
The Planning Ministry last week issued budget ceilings to the ministries based on Rs800 billion PSDP for the next year. The higher development spending may further increase the gap between the government and the IMF projections.
The FBR’s revenue target is estimated at around Rs7.2 trillion while another Rs2 trillion could be arranged as non-tax receipts. The Ministry of Finance had initially estimated Rs450 billion as the Petroleum Development Levy target but it was giving a second thought to it, as the government will have to restore the petroleum levy at the beginning of the new fiscal year, starting in July.
Published in The Express Tribune, May 31st, 2022.
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Pakistan has made another request to China for the rollover of $2 billion worth of debt maturing soon but it forgot to book Chinese and International Monetary Fund (IMF) loans in the budget, underreporting foreign borrowing by $7 billion for the next fiscal year.
Finance Minister Miftah Ismail admitted on Saturday that the exclusion of IMF and some Chinese loans was a mistake that would be rectified. Once the correction is made and duly notified to the National Assembly, Pakistan’s foreign economic assistance plan for fiscal year 2022-23 will jump to a record $24 billion.
The government has not included $4 billion of China’s State Administration of Foreign Exchange (SAFE) loans and a minimum $3 billion of IMF loans in its foreign receipts. The IMF receipts are linked with the revival of its bailout package.
A Chinese SAFE deposit loan of $1 billion is maturing before the end of current month while another $1 billion loan will mature before the end of next month.
Prime Minister Shehbaz Sharif has formally requested the Chinese government to roll over both the maturing loans, according to officials.
Earlier, in March this year, China rolled over $2 billion worth of SAFE deposit loans.
However, the Ministry of Finance did not show these $4 billion loan rollovers in the next fiscal year’s borrowing plan. Budget books showed that the total external receipts were estimated at $17 billion, or Rs3.13 trillion, for fiscal year 2022-23.
These loans are taken for budget support, building foreign exchange reserves and project financing.
However, after including $4 billion of Chinese SAFE deposit loans and the remaining $3 billion of IMF loans in the external receipts, the borrowing plan will increase to $24 billion in the next fiscal year.
Finance Minister Miftah Ismail had expressed hope that the IMF would increase the loan size from a total of $6 billion to $8 billion.
An amount of $3 billion has already been disbursed by the global lender. In case the loan size is increased to $8 billion, the government will have to show borrowing of $5 billion from the IMF in its annual plan.
Sources said that a lot of efforts were needed to convince the IMF to revive the loan programme, as some of the expenditure and revenue measures announced in the budget were not in line with the IMF’s expectations. Authorities foresee hard bargaining with the IMF team in the coming days.
They said that the government may have to reverse some of the budgetary measures to seek the IMF’s nod for the budget.
The government has shown $7.5 billion, or Rs1.4 trillion, in foreign commercial loans in its next year’s borrowing plan. These are largely Chinese commercial loans.
Last week, the finance minister announced a deal with China for the rollover of $2.2 billion, or RMB 15 billion, of Chinese commercial loans. Pakistan is still waiting for the disbursement, which it had hoped to receive within days after the deal.
During the visit of former prime minister Imran Khan to Beijing in February this year, Pakistan had requested a total lifeline of $21 billion that included rollover of $10.7 billion of both commercial and SAFE deposit loans.
These included the rollover of SAFE deposits of $4 billion and commercial loans of $6.7 billion on maturity.
Pakistan has only $9.2 billion in foreign exchange reserves as of last week and its currency is fast depreciating. The rupee fell to the lowest level of Rs203 to a dollar in the inter-bank market.
Pakistan had also requested to increase the size of the currency swap facility from $4.5 billion to $10 billion – an additional borrowing of $5.5 billion, which the Chinese authorities did not approve at that time.
Budget documents showed that Pakistan had planned to float $2 billion worth of international Sukuk and Eurobond in the next fiscal year. It can get a better price only if the IMF programme is restored as foreign investors fear default on payments of previous bonds.
The government is expected to get a $1.2 billion loan from the Islamic Development Bank for buying oil on deferred payments and $800 million in oil facilities from Saudi Arabia in the next fiscal year.
It has also budgeted $1.5 billion in project financing. Programme loans are estimated at $4 billion in the next fiscal year, including $1.6 billion on account of Naya Pakistan Certificates – a product of the previous PTI government.
Published in The Express Tribune, June 12th, 2022.
Finance Minister Miftah Ismail admitted on Saturday that the exclusion of IMF and some Chinese loans was a mistake that would be rectified. Once the correction is made and duly notified to the National Assembly, Pakistan’s foreign economic assistance plan for fiscal year 2022-23 will jump to a record $24 billion.
The government has not included $4 billion of China’s State Administration of Foreign Exchange (SAFE) loans and a minimum $3 billion of IMF loans in its foreign receipts. The IMF receipts are linked with the revival of its bailout package.
A Chinese SAFE deposit loan of $1 billion is maturing before the end of current month while another $1 billion loan will mature before the end of next month.
Prime Minister Shehbaz Sharif has formally requested the Chinese government to roll over both the maturing loans, according to officials.
Earlier, in March this year, China rolled over $2 billion worth of SAFE deposit loans.
However, the Ministry of Finance did not show these $4 billion loan rollovers in the next fiscal year’s borrowing plan. Budget books showed that the total external receipts were estimated at $17 billion, or Rs3.13 trillion, for fiscal year 2022-23.
These loans are taken for budget support, building foreign exchange reserves and project financing.
However, after including $4 billion of Chinese SAFE deposit loans and the remaining $3 billion of IMF loans in the external receipts, the borrowing plan will increase to $24 billion in the next fiscal year.
Finance Minister Miftah Ismail had expressed hope that the IMF would increase the loan size from a total of $6 billion to $8 billion.
An amount of $3 billion has already been disbursed by the global lender. In case the loan size is increased to $8 billion, the government will have to show borrowing of $5 billion from the IMF in its annual plan.
Sources said that a lot of efforts were needed to convince the IMF to revive the loan programme, as some of the expenditure and revenue measures announced in the budget were not in line with the IMF’s expectations. Authorities foresee hard bargaining with the IMF team in the coming days.
They said that the government may have to reverse some of the budgetary measures to seek the IMF’s nod for the budget.
The government has shown $7.5 billion, or Rs1.4 trillion, in foreign commercial loans in its next year’s borrowing plan. These are largely Chinese commercial loans.
Last week, the finance minister announced a deal with China for the rollover of $2.2 billion, or RMB 15 billion, of Chinese commercial loans. Pakistan is still waiting for the disbursement, which it had hoped to receive within days after the deal.
During the visit of former prime minister Imran Khan to Beijing in February this year, Pakistan had requested a total lifeline of $21 billion that included rollover of $10.7 billion of both commercial and SAFE deposit loans.
These included the rollover of SAFE deposits of $4 billion and commercial loans of $6.7 billion on maturity.
Pakistan has only $9.2 billion in foreign exchange reserves as of last week and its currency is fast depreciating. The rupee fell to the lowest level of Rs203 to a dollar in the inter-bank market.
Pakistan had also requested to increase the size of the currency swap facility from $4.5 billion to $10 billion – an additional borrowing of $5.5 billion, which the Chinese authorities did not approve at that time.
Budget documents showed that Pakistan had planned to float $2 billion worth of international Sukuk and Eurobond in the next fiscal year. It can get a better price only if the IMF programme is restored as foreign investors fear default on payments of previous bonds.
The government is expected to get a $1.2 billion loan from the Islamic Development Bank for buying oil on deferred payments and $800 million in oil facilities from Saudi Arabia in the next fiscal year.
It has also budgeted $1.5 billion in project financing. Programme loans are estimated at $4 billion in the next fiscal year, including $1.6 billion on account of Naya Pakistan Certificates – a product of the previous PTI government.
Published in The Express Tribune, June 12th, 2022.
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Two days after the budget was formally presented in the National Assembly, the PML-N and the PTI continued to butt heads over each other's economic performance and the state of Pakistan's external debt on Sunday.
Earlier today, Information Minister Marriyum Aurangzeb took to Twitter to share a video clip of a news package featuring former finance minister Shaukat Tarin.
The clip was of a press conference Tarin held yesterday, in which he had said: "They (government) say ever since Pakistan was formed they (PTI) have raised debt by 80 per cent. It did not increase by 80 per cent in the [four] years [of PTI rule]. It grew by 76 per cent."
Referring to those remarks, Aurangzeb said: "At last, Shaukat Tarin has admitted that Imran Khan took out loans worth Rs20 thousand billion during his four-year tenure, which is 76 per cent of the loans taken out in Pakistan's history." She added that more such "admissions" would follow.
Finance Minister Miftah Ismail then said: "Total public debt under PTI went from Rs 24,953bn to Rs 44,366bn, an increase of 78pc. And total debt plus liabilities went from Rs29,879bn to Rs 53,544bn, an increase of 79pc. The PTI has added 79pc in 3.75 years of all debt + liabilities added in the previous 71 years."
PTI's Fawad Chaudhry replied to Aurangzeb by saying that she was bound to make such uninformed remarks when she spent all her time "playing Candy Crush" — a mobile phone game. Yesterday, he claimed the government was not serious because Aurangzeb was "playing video games" during the post-budget press conference.
The PTI government took out loans of $52bn of which $38bn was to pay back the loans taken out by the previous governments, Chaudhry said in another tweet today. "If you do not like the agreements made with the International Monetary Fund (IMF), then why does the poor government go to the board?" he asked.
In a later Tweet, he also gave a breakdown of Pakistan's external debt, saying it was $45bn from 2008-09, $70.5bn from 2018-19 and $88bn till March 2022.
Meanwhile, Tarin said that the PTI's economic performance over the last two years was the best in 30 years. "Stop deceiving people, they know the truth. Your performance is evident in the last eight weeks, pathetic," he said.
He went on to say that the former government was well on its way to accelerating economic growth "in an inclusive and sustainable basis despite very high International commodity prices".
"Don't know why we were displaced," the senior banker said.
In a later tweet, Tarin claimed that while PTI's debt increased by 76 per cent "despite Covid when tax burdens increased world over", the PML-N increased debt by 79 per cent during their time.
The economic survey of Pakistan revealed that total external debt had touched $88.8bn (Rs16.29 trillion) by the end of March 2022, having increased by around $2.3bn over the first nine months of the outgoing fiscal year.
'Budget represents significant improvements'
Prime Minister Shehbaz Sharif said that the budget represented "significant improvement" in several ways.
"It has provided more educational opportunities for our youth, particularly from Balochistan and targeted subsidies for financially weaker people. More importantly, it has taxed non-productive assets of the rich," he said.
PTI Chairman Imran Khan, on the other hand, was still not convinced. "Given the special needs of tribal districts, my government had increased their funding by three times to Rs131bn. Imported government has budgeted only Rs110bn, reduced development funding, zero allocation for displace persons and zero increase in current budget. Shows incompetence and ill-intent of government of crooks," he said.
Earlier today, Information Minister Marriyum Aurangzeb took to Twitter to share a video clip of a news package featuring former finance minister Shaukat Tarin.
The clip was of a press conference Tarin held yesterday, in which he had said: "They (government) say ever since Pakistan was formed they (PTI) have raised debt by 80 per cent. It did not increase by 80 per cent in the [four] years [of PTI rule]. It grew by 76 per cent."
Referring to those remarks, Aurangzeb said: "At last, Shaukat Tarin has admitted that Imran Khan took out loans worth Rs20 thousand billion during his four-year tenure, which is 76 per cent of the loans taken out in Pakistan's history." She added that more such "admissions" would follow.
Finance Minister Miftah Ismail then said: "Total public debt under PTI went from Rs 24,953bn to Rs 44,366bn, an increase of 78pc. And total debt plus liabilities went from Rs29,879bn to Rs 53,544bn, an increase of 79pc. The PTI has added 79pc in 3.75 years of all debt + liabilities added in the previous 71 years."
PTI's Fawad Chaudhry replied to Aurangzeb by saying that she was bound to make such uninformed remarks when she spent all her time "playing Candy Crush" — a mobile phone game. Yesterday, he claimed the government was not serious because Aurangzeb was "playing video games" during the post-budget press conference.
The PTI government took out loans of $52bn of which $38bn was to pay back the loans taken out by the previous governments, Chaudhry said in another tweet today. "If you do not like the agreements made with the International Monetary Fund (IMF), then why does the poor government go to the board?" he asked.
In a later Tweet, he also gave a breakdown of Pakistan's external debt, saying it was $45bn from 2008-09, $70.5bn from 2018-19 and $88bn till March 2022.
Meanwhile, Tarin said that the PTI's economic performance over the last two years was the best in 30 years. "Stop deceiving people, they know the truth. Your performance is evident in the last eight weeks, pathetic," he said.
He went on to say that the former government was well on its way to accelerating economic growth "in an inclusive and sustainable basis despite very high International commodity prices".
"Don't know why we were displaced," the senior banker said.
In a later tweet, Tarin claimed that while PTI's debt increased by 76 per cent "despite Covid when tax burdens increased world over", the PML-N increased debt by 79 per cent during their time.
The economic survey of Pakistan revealed that total external debt had touched $88.8bn (Rs16.29 trillion) by the end of March 2022, having increased by around $2.3bn over the first nine months of the outgoing fiscal year.
'Budget represents significant improvements'
Prime Minister Shehbaz Sharif said that the budget represented "significant improvement" in several ways.
"It has provided more educational opportunities for our youth, particularly from Balochistan and targeted subsidies for financially weaker people. More importantly, it has taxed non-productive assets of the rich," he said.
PTI Chairman Imran Khan, on the other hand, was still not convinced. "Given the special needs of tribal districts, my government had increased their funding by three times to Rs131bn. Imported government has budgeted only Rs110bn, reduced development funding, zero allocation for displace persons and zero increase in current budget. Shows incompetence and ill-intent of government of crooks," he said.
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Finance Minister Miftah Ismail has presented a “provisional” budget of Rs9.5 trillion in the National Assembly that may change in the light of any deal with the International Monetary Fund (IMF), as the government slaps taxes on salaried class people’s expenses on health and life insurance.
In a positive development, through the Finance Bill 2022, the government has also proposed to withdraw 50% income tax concessions available to ex-servicemen and the serving personnel of the Pakistan armed forces and officers of the federal and the provincial governments on the first sale of their plots.
The normal tax rates, too, have been reintroduced on the flying allowance of serving personnel of the armed forces and pilots of the commercial airlines, according to the Finance Bill that Ismail laid before the National Assembly on Friday.
The government will earn a minimum of Rs5 billion from the withdrawal of tax concessions on allowances of the salaried persons.
The details of the revenue gains after withdrawing reduced income tax rates being availed by the ex-servicemen and the armed forces personnel were not available, which might also run in billions of rupees due to the number of transactions taking place.
The government is facing criticism for not withdrawing the tax exemptions and concessions availed by the mighty of the society. But the amount appears paltry compared with Rs400 billion total income tax exemptions. The Rs26 billion exemptions got by only collective investment schemes and the Real Estate Investment Trusts (REITs) in fiscal year 2021-22.
However, the bigger surprise was Miftah Ismail’s decision to present a provisional budget in the National Assembly, which is rare. “The figures are provisional. Final figures will be provided during budget session”, reads the footnote of almost every main table of the Budget-in-Brief and Annual Budget Statement for 2022-23.
A senior Finance Ministry official explained that footnote had to be added, as the final budget figures were not available at the time of printing of these books. The official maintained that the total size of the budget may remain unchanged at Rs9.5 trillion, as it had been approved by the cabinet but the other numbers could undergo some changes.
The Budget-in-Brief book is printed on the eve of the budget. The sources said that till two days ago the under discussion size of the budget was Rs9.442 trillion, which was marginally increased by Rs60 billion at the time of presentation of budget. This indicates that the books were printed just hours before the speech by the finance minister.
The sources said that one of the reasons behind presenting the provisional budget figures was the disagreement between Pakistan and the IMF over the budget numbers and some of the tax proposals.
READ PM Shehbaz hails budget for taxing the rich
Although the National Assembly has the constitutional mandate to approve, amend or reject the budget, it hardly brings any changes in the proposed authorised schedule of expenditures. Mostly, the changes after the presentation of the budget are made in the taxation proposals.
The budget documents further confirmed that the coalition government was still confused about the size of the Public Sector Development Programme (PSDP). The Planning Ministry has presented Rs800 billion worth of the PSDP while the Budget-in-Brief book puts the figure at Rs727 billion.
“Figures are provisional, which will be finalized after approval of federal cabinet,” according to another footnote at table 17. A consolidated summary of the revised estimates of the fiscal year 2021-22 budget is also missing.
Taxation Measures
The government has made certain changes in the income tax law to tax expenditures of the salaried persons and withdraw few exemptions. The government has proposed to charge capital gains tax at full rates on disposal of immovable property acquired or allotted to ex-servicemen and serving persons personal of armed forces or ex-employees or serving personnel of federal and provincial governments, being the original allottees of the immovable property.
At present, the ex-servicemen and serving personnel get 50 to 75% concession against the standard capital gains tax rates, which if approved by the parliament, would be withdrawn from July.
The government has also withdrawn the reduced rate on flying allowances received by flight engineers, navigators of Pakistan armed forces, Pakistani airlines or the Civil Aviation Authority, junior commissioned officers or other ranks of the armed forces; and submarine allowance by the officers of the Pakistan Navy. The present rate is 2.5% and these allowances will now be taxed as part of normal income.
Similarly, total allowances received by pilots of any Pakistani airlines are proposed to be taxed at normal rates as against the existing reduced rate of 7.5%. These two allowances were causing annual Rs330 million loss to the exchequer.
In another major decision, the government has also withdrawn the facility of charging only 15% income tax rate on the profits that a person earns by giving loans to the federal government. Now, this income will too be treated as normal income. The cost of this reduced tax rate has not been included in the Tax Expenditure report of this fiscal year.
Burden on salaried class
Where the government has proposed to give Rs47 billion relief to the salaried class, it has passed on Rs4.5 billion burden on these people by charging tax on their essential expenditures.
The government has withdrawn the facility of no tax on the salary component that will be used to service home loan by a salaried person, aimed at earning additional Rs650.1 million in the next fiscal year.
Similarly, the tax credit to the salaried persons for investment in shares and life insurance has also been withdrawn to collect Rs2.68 billion in the next fiscal year. Similarly, the government has also withdrawn the tax credit available on the people for their payments for health insurance. This will have negligible revenue impact of Rs28 million, as per the tax expenditure report.
Tax credit for contribution to approved pension fund has also been withdrawn for the sake of Rs1.16 billion additional revenues.
The government has also withdrawn the income tax exemption on amounts received as monthly instalment from an income payment plan invested out of the accumulated balance of an individual pension accounts.
The tax allowance on export of computer software and information technology services has also been withdrawn, as the government has omitted clause 65F 1C from the law that was ensuring this facility.
Express Tribune
In a positive development, through the Finance Bill 2022, the government has also proposed to withdraw 50% income tax concessions available to ex-servicemen and the serving personnel of the Pakistan armed forces and officers of the federal and the provincial governments on the first sale of their plots.
The normal tax rates, too, have been reintroduced on the flying allowance of serving personnel of the armed forces and pilots of the commercial airlines, according to the Finance Bill that Ismail laid before the National Assembly on Friday.
The government will earn a minimum of Rs5 billion from the withdrawal of tax concessions on allowances of the salaried persons.
The details of the revenue gains after withdrawing reduced income tax rates being availed by the ex-servicemen and the armed forces personnel were not available, which might also run in billions of rupees due to the number of transactions taking place.
The government is facing criticism for not withdrawing the tax exemptions and concessions availed by the mighty of the society. But the amount appears paltry compared with Rs400 billion total income tax exemptions. The Rs26 billion exemptions got by only collective investment schemes and the Real Estate Investment Trusts (REITs) in fiscal year 2021-22.
However, the bigger surprise was Miftah Ismail’s decision to present a provisional budget in the National Assembly, which is rare. “The figures are provisional. Final figures will be provided during budget session”, reads the footnote of almost every main table of the Budget-in-Brief and Annual Budget Statement for 2022-23.
A senior Finance Ministry official explained that footnote had to be added, as the final budget figures were not available at the time of printing of these books. The official maintained that the total size of the budget may remain unchanged at Rs9.5 trillion, as it had been approved by the cabinet but the other numbers could undergo some changes.
The Budget-in-Brief book is printed on the eve of the budget. The sources said that till two days ago the under discussion size of the budget was Rs9.442 trillion, which was marginally increased by Rs60 billion at the time of presentation of budget. This indicates that the books were printed just hours before the speech by the finance minister.
The sources said that one of the reasons behind presenting the provisional budget figures was the disagreement between Pakistan and the IMF over the budget numbers and some of the tax proposals.
READ PM Shehbaz hails budget for taxing the rich
Although the National Assembly has the constitutional mandate to approve, amend or reject the budget, it hardly brings any changes in the proposed authorised schedule of expenditures. Mostly, the changes after the presentation of the budget are made in the taxation proposals.
The budget documents further confirmed that the coalition government was still confused about the size of the Public Sector Development Programme (PSDP). The Planning Ministry has presented Rs800 billion worth of the PSDP while the Budget-in-Brief book puts the figure at Rs727 billion.
“Figures are provisional, which will be finalized after approval of federal cabinet,” according to another footnote at table 17. A consolidated summary of the revised estimates of the fiscal year 2021-22 budget is also missing.
Taxation Measures
The government has made certain changes in the income tax law to tax expenditures of the salaried persons and withdraw few exemptions. The government has proposed to charge capital gains tax at full rates on disposal of immovable property acquired or allotted to ex-servicemen and serving persons personal of armed forces or ex-employees or serving personnel of federal and provincial governments, being the original allottees of the immovable property.
At present, the ex-servicemen and serving personnel get 50 to 75% concession against the standard capital gains tax rates, which if approved by the parliament, would be withdrawn from July.
The government has also withdrawn the reduced rate on flying allowances received by flight engineers, navigators of Pakistan armed forces, Pakistani airlines or the Civil Aviation Authority, junior commissioned officers or other ranks of the armed forces; and submarine allowance by the officers of the Pakistan Navy. The present rate is 2.5% and these allowances will now be taxed as part of normal income.
Similarly, total allowances received by pilots of any Pakistani airlines are proposed to be taxed at normal rates as against the existing reduced rate of 7.5%. These two allowances were causing annual Rs330 million loss to the exchequer.
In another major decision, the government has also withdrawn the facility of charging only 15% income tax rate on the profits that a person earns by giving loans to the federal government. Now, this income will too be treated as normal income. The cost of this reduced tax rate has not been included in the Tax Expenditure report of this fiscal year.
Burden on salaried class
Where the government has proposed to give Rs47 billion relief to the salaried class, it has passed on Rs4.5 billion burden on these people by charging tax on their essential expenditures.
The government has withdrawn the facility of no tax on the salary component that will be used to service home loan by a salaried person, aimed at earning additional Rs650.1 million in the next fiscal year.
Similarly, the tax credit to the salaried persons for investment in shares and life insurance has also been withdrawn to collect Rs2.68 billion in the next fiscal year. Similarly, the government has also withdrawn the tax credit available on the people for their payments for health insurance. This will have negligible revenue impact of Rs28 million, as per the tax expenditure report.
Tax credit for contribution to approved pension fund has also been withdrawn for the sake of Rs1.16 billion additional revenues.
The government has also withdrawn the income tax exemption on amounts received as monthly instalment from an income payment plan invested out of the accumulated balance of an individual pension accounts.
The tax allowance on export of computer software and information technology services has also been withdrawn, as the government has omitted clause 65F 1C from the law that was ensuring this facility.
Express Tribune
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Pakistan budget needs additional measures to meet goals: IMF
ISLAMABAD: Additional measures will be needed to bring Pakistan's budget for fiscal year 2022-23 in line with the key objectives of its International Monetary Fund programme, the lender's resident representative in Islamabad said on Monday.
The federal government unveiled a Rs9.5 trillion budget for 2022-23 on Friday aimed at tight fiscal consolidation in a bid to convince the IMF to restart much-needed bailout payments.
"Our preliminary estimate is that additional measures will be needed to strengthen the budget and bring it in line with key programme objectives," Esther Perez Ruiz told Reuters.
Finance Minister Miftah Ismail told Reuters on Saturday that the IMF had expressed concerns about the budget numbers, including fuel subsidies, a widening current account deficit, and the need to raise more direct taxes.
He, however, added that his government was confident they could adjust the budget to bring the IMF on board and was hopeful of securing a successful review this month.
"Discussions with the authorities continue to obtain more clarity on certain revenue and spending items and allow for a full assessment," Ruiz said.
She said the fund was ready to continue to support the authorities’ efforts and in the implementation of policies to promote macroeconomic stability.
Pakistan is halfway through a $6 billion, 39-month IMF programme that has stalled over the lender's concerns over the status of some of its objectives, including fiscal consolidation.
The next tranche that Pakistan is to receive upon a successful review is $900 million, and a green light from the IMF would also open up other global funding avenues.
Pakistan urgently needs funds in the face of dwindling foreign exchange reserves, which have reached $9.2 billion - enough for less than 45 days of imports.
https://tribune.com.pk/story/2361529/pakistan-budget-needs-additional-measures-to-meet-goals-imf
ISLAMABAD: Additional measures will be needed to bring Pakistan's budget for fiscal year 2022-23 in line with the key objectives of its International Monetary Fund programme, the lender's resident representative in Islamabad said on Monday.
The federal government unveiled a Rs9.5 trillion budget for 2022-23 on Friday aimed at tight fiscal consolidation in a bid to convince the IMF to restart much-needed bailout payments.
"Our preliminary estimate is that additional measures will be needed to strengthen the budget and bring it in line with key programme objectives," Esther Perez Ruiz told Reuters.
Finance Minister Miftah Ismail told Reuters on Saturday that the IMF had expressed concerns about the budget numbers, including fuel subsidies, a widening current account deficit, and the need to raise more direct taxes.
He, however, added that his government was confident they could adjust the budget to bring the IMF on board and was hopeful of securing a successful review this month.
"Discussions with the authorities continue to obtain more clarity on certain revenue and spending items and allow for a full assessment," Ruiz said.
She said the fund was ready to continue to support the authorities’ efforts and in the implementation of policies to promote macroeconomic stability.
Pakistan is halfway through a $6 billion, 39-month IMF programme that has stalled over the lender's concerns over the status of some of its objectives, including fiscal consolidation.
The next tranche that Pakistan is to receive upon a successful review is $900 million, and a green light from the IMF would also open up other global funding avenues.
Pakistan urgently needs funds in the face of dwindling foreign exchange reserves, which have reached $9.2 billion - enough for less than 45 days of imports.
https://tribune.com.pk/story/2361529/pakistan-budget-needs-additional-measures-to-meet-goals-imf
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Officials from the International Monetary Fund (IMF) are viewing Pakistan’s budget for 2022-2023 as a document which contains points for further negotiations on resuming an IMF package for Islamabad.
On Friday, Pakistan unveiled a $47 billion budget for 2022-23, which includes several fiscal consolidation measures that Islamabad hopes will convince the IMF to resume the much-needed bailout payments to the country.
Diplomatic sources in Washington say that at the staff-level talks, held in Doha last month, the IMF and Pakistan reached an understanding on several key issues, such as withdrawing subsidies and increasing the tax collection.
Sources said one of the key points on which both sides found themselves in agreement was social protection, i.e. reducing the impact of austerity measures on the poor. “IMF officials acknowledge that some of these measures can hurt the poor and are ready to work with Pakistan to reduce the impact,” one of the sources said.
Fund working with Islamabad to reduce impact of austerity on country’s poorest classes
After the first round of talks with IMF officials in Washington in April, Finance Minister Miftah Ismail had hinted at issuing fuel passes for vehicles used by the common people or for public transport.
“The negotiators can also work on reducing the impact on essential commodities, such as food items,” another source said. Even the price of locally-produced essential commodities can go up when fuel prices are increased.
Similar arrangements could also be made for the power sector to protect low-end consumers, one of the sources said, pointing out that the IMF views such measures as “social protection” and would be ready to help the government in doing so.
The sources also rejected media speculation that the IMF would not negotiate with an interim government. “The IMF will have no problem in dealing with an interim government, if the steps they negotiate can be implemented within their tenure,” one of the sources said.
Another source said that “the IMF has concerns about governance and corruption as well” and would “not like to be associated with any programme perceived as open to corruption”.
“The Fund would also not like to be seen as helping one set of politicians against another, whether they are in powers or in the opposition,” the source added.
The purpose of the measures suggested by the IMF is to curb Pakistan’s fiscal and current account deficits, the sources said, adding that the Fund wants a better arrangement this time as the previous government deviated from policies agreed in the last review.
The government has already withdrawn fuel and power sector subsidies given by its predecessors, which contravened the arrangement with the IMF.
The measures announced in the budget include two percent additional tax on individuals with annual income of 30 million rupees, a 20 percent increase in tax collection by preventing evasion, and reducing fuel consumption to curb the ever-widening oil bill.
The government has also indicated that it may further increase fuel prices, a measure that will hurt consumers across the board. The government also plans to raise 96 billion rupees from privatisation in 2022/23.
IMF Pakistan Representative Esther Perez Ruiz had told the media on Monday that Pakistan needs to take more stringent measures to keep the Fund’s loan programme on track.
Pakistan had signed a 39-month, $6bn Extended Fund Facility with the IMF in July 2019, but the Fund stopped the disbursement of about $3bn when the previous government reneged on its commitments.
Published in Dawn, June 15th, 2022
On Friday, Pakistan unveiled a $47 billion budget for 2022-23, which includes several fiscal consolidation measures that Islamabad hopes will convince the IMF to resume the much-needed bailout payments to the country.
Diplomatic sources in Washington say that at the staff-level talks, held in Doha last month, the IMF and Pakistan reached an understanding on several key issues, such as withdrawing subsidies and increasing the tax collection.
Sources said one of the key points on which both sides found themselves in agreement was social protection, i.e. reducing the impact of austerity measures on the poor. “IMF officials acknowledge that some of these measures can hurt the poor and are ready to work with Pakistan to reduce the impact,” one of the sources said.
Fund working with Islamabad to reduce impact of austerity on country’s poorest classes
After the first round of talks with IMF officials in Washington in April, Finance Minister Miftah Ismail had hinted at issuing fuel passes for vehicles used by the common people or for public transport.
“The negotiators can also work on reducing the impact on essential commodities, such as food items,” another source said. Even the price of locally-produced essential commodities can go up when fuel prices are increased.
Similar arrangements could also be made for the power sector to protect low-end consumers, one of the sources said, pointing out that the IMF views such measures as “social protection” and would be ready to help the government in doing so.
The sources also rejected media speculation that the IMF would not negotiate with an interim government. “The IMF will have no problem in dealing with an interim government, if the steps they negotiate can be implemented within their tenure,” one of the sources said.
Another source said that “the IMF has concerns about governance and corruption as well” and would “not like to be associated with any programme perceived as open to corruption”.
“The Fund would also not like to be seen as helping one set of politicians against another, whether they are in powers or in the opposition,” the source added.
The purpose of the measures suggested by the IMF is to curb Pakistan’s fiscal and current account deficits, the sources said, adding that the Fund wants a better arrangement this time as the previous government deviated from policies agreed in the last review.
The government has already withdrawn fuel and power sector subsidies given by its predecessors, which contravened the arrangement with the IMF.
The measures announced in the budget include two percent additional tax on individuals with annual income of 30 million rupees, a 20 percent increase in tax collection by preventing evasion, and reducing fuel consumption to curb the ever-widening oil bill.
The government has also indicated that it may further increase fuel prices, a measure that will hurt consumers across the board. The government also plans to raise 96 billion rupees from privatisation in 2022/23.
IMF Pakistan Representative Esther Perez Ruiz had told the media on Monday that Pakistan needs to take more stringent measures to keep the Fund’s loan programme on track.
Pakistan had signed a 39-month, $6bn Extended Fund Facility with the IMF in July 2019, but the Fund stopped the disbursement of about $3bn when the previous government reneged on its commitments.
Published in Dawn, June 15th, 2022
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- Oct 2, 2004
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Pakistan has sought the United States support for the revival of the International Monetary Fund programme, as the global lender has yet to agree to a staff level pact despite the government having taken many difficult steps.
The government’s economic team met with US Ambassador Donald Blome and sought Washington’s support and acknowledgement of the actions taken so far, at least two people familiar with the discussions told The Express Tribune. Blome was apprised about measures that have been taken to revive the programme and bring stability in the economy, they added.
Finance Minister Miftah Ismail and Minister of State for Finance Dr Aisha Pasha met with the US envoy. The US is the largest shareholder in the IMF and has in the past too played a role in helping Islamabad complete the fund’s programme reviews.
The US ambassador was informed that the government has proposed fiscal consolidation equal to 2.2% of Gross Domestic Product despite challenging times.
The Ministry of Finance did not officially comment on the article.
Despite three main rounds of talks, including two by the incumbent government, and multiple virtual contacts, the IMF did not share the draft of the Memorandum for Economic and Financial Policies (MEFP) with Pakistan till Thursday afternoon, according to the sources.
The MEFP forms the basis of any staff level agreement and without finalization of the MEFP no formal staff level agreement can be signed.
The Pakistan-IMF programme remains derailed since March this year after the previous government backtracked from its commitments.
The meeting between the Pakistani and US authorities took place the day the IMF clarified its position on its demand to link the energy payments to the Chinese Independent Power Producers with the concessions that non China-Pakistan Economic Corridor (CPEC) projects had extended to the government last year.
“The IMF did not ask Pakistan to renegotiate CEPC IPP contracts. These claims are simply untrue”, according to a statement that the IMF attributed to its Resident Representative, Esther Perez.
The statement added that “rather, the IMF supports the government’s multipronged strategy to restore energy sector viability which shares the burden of restoring viability across all stakeholders—the government, producers, and consumers”.
Last week, the IMF country head had given a comprehensive statement on its position while responding to The Express Tribune.
Read Fuel prices raised again to unlock IMF funding
The Express Tribune had inquired whether “is it correct that the IMF wants that Pakistan should renegotiate with Chinese IPPs and seek concessions like the country did in case of 1994 and 2002 policy IPPs before settling outstanding dues of Chinese IPPs on account of power purchase payments by Pakistan?”
In its detailed reply last week, the IMF did not deny that it had asked Pakistan to renegotiate. Rather, it made references to Pakistan’s “limited fiscal space” and “concluding renegotiations of the capacity payment terms with over 30 IPPs last year”.
Last week, the IMF country head said that “an important principle underpinning these (power sector) reforms is that all stakeholders contribute in an equitable manner to reduce the circular debt, between the government, IPPs and consumers, while protecting the most vulnerable consumers”.
She had also said that Pakistani authorities “should be cognizant of the limited fiscal space available to clear any outstanding arrears of the sector stakeholders, and thus there should be a trade-off between this and other government priorities, and the potential to unlock lower capacity payments for electricity as part of the aforementioned burden sharing across stakeholders”.
Pakistan owes around Rs300 billion to the Chinese IPPs and the IMF was keeping track of every payment made to them.
So far, 11 Chinese IPPs, set up with an investment of $10.2 billion, are operational, having a total generation capacity of 5,320 megawatts. Out of them, nearly 2,000MW of power plants had been shut due to the depletion of imported coal inventories.
The government is making all-out efforts to revive the programme and has taken many unpopular steps, but still remains short of the IMF’s expectations, said a senior Pakistani negotiator.
The sources said that if no breakthrough is achieved in the next couple of days, the Secretary Finance and the Minister for Finance may dash to the United States to meet the top management of the IMF.
The coalition government had hoped that after increasing the petroleum products prices and starting the process for approval of increase in electricity prices, the IMF may agree to reach a staff level agreement.
However, the IMF also wants not only a reversal of cut in the income tax rates for the salaried class but is seeking to pass on an additional burden of Rs125 billion on the salaried people. The government has now worked out a new proposal that entails reversing Rs47 billion tax relief and then passing on additional burden of Rs18 billion to the salaried class, the sources added.
The previous government had committed to increase the taxes on the salaried class with effect from July and also agreed to share the draft of the personal income tax reforms with the IMF by end of February 2022. The PTI did not fulfill its commitments.
The government has already massively increased the fuel prices and abolished all subsidies. But the IMF is now seeking reintroduction of the petroleum levy and sales tax over and above the existing prices, said the sources.
While talking to the media after the Senate Standing Committee on Finance meeting, Minister of State for Finance Dr Aisha Pasha said that there was now more clarity to the IMF on the new budget, hoping to sign a deal very soon.
Express Tribune
The government’s economic team met with US Ambassador Donald Blome and sought Washington’s support and acknowledgement of the actions taken so far, at least two people familiar with the discussions told The Express Tribune. Blome was apprised about measures that have been taken to revive the programme and bring stability in the economy, they added.
Finance Minister Miftah Ismail and Minister of State for Finance Dr Aisha Pasha met with the US envoy. The US is the largest shareholder in the IMF and has in the past too played a role in helping Islamabad complete the fund’s programme reviews.
The US ambassador was informed that the government has proposed fiscal consolidation equal to 2.2% of Gross Domestic Product despite challenging times.
The Ministry of Finance did not officially comment on the article.
Despite three main rounds of talks, including two by the incumbent government, and multiple virtual contacts, the IMF did not share the draft of the Memorandum for Economic and Financial Policies (MEFP) with Pakistan till Thursday afternoon, according to the sources.
The MEFP forms the basis of any staff level agreement and without finalization of the MEFP no formal staff level agreement can be signed.
The Pakistan-IMF programme remains derailed since March this year after the previous government backtracked from its commitments.
The meeting between the Pakistani and US authorities took place the day the IMF clarified its position on its demand to link the energy payments to the Chinese Independent Power Producers with the concessions that non China-Pakistan Economic Corridor (CPEC) projects had extended to the government last year.
“The IMF did not ask Pakistan to renegotiate CEPC IPP contracts. These claims are simply untrue”, according to a statement that the IMF attributed to its Resident Representative, Esther Perez.
The statement added that “rather, the IMF supports the government’s multipronged strategy to restore energy sector viability which shares the burden of restoring viability across all stakeholders—the government, producers, and consumers”.
Last week, the IMF country head had given a comprehensive statement on its position while responding to The Express Tribune.
Read Fuel prices raised again to unlock IMF funding
The Express Tribune had inquired whether “is it correct that the IMF wants that Pakistan should renegotiate with Chinese IPPs and seek concessions like the country did in case of 1994 and 2002 policy IPPs before settling outstanding dues of Chinese IPPs on account of power purchase payments by Pakistan?”
In its detailed reply last week, the IMF did not deny that it had asked Pakistan to renegotiate. Rather, it made references to Pakistan’s “limited fiscal space” and “concluding renegotiations of the capacity payment terms with over 30 IPPs last year”.
Last week, the IMF country head said that “an important principle underpinning these (power sector) reforms is that all stakeholders contribute in an equitable manner to reduce the circular debt, between the government, IPPs and consumers, while protecting the most vulnerable consumers”.
She had also said that Pakistani authorities “should be cognizant of the limited fiscal space available to clear any outstanding arrears of the sector stakeholders, and thus there should be a trade-off between this and other government priorities, and the potential to unlock lower capacity payments for electricity as part of the aforementioned burden sharing across stakeholders”.
Pakistan owes around Rs300 billion to the Chinese IPPs and the IMF was keeping track of every payment made to them.
So far, 11 Chinese IPPs, set up with an investment of $10.2 billion, are operational, having a total generation capacity of 5,320 megawatts. Out of them, nearly 2,000MW of power plants had been shut due to the depletion of imported coal inventories.
The government is making all-out efforts to revive the programme and has taken many unpopular steps, but still remains short of the IMF’s expectations, said a senior Pakistani negotiator.
The sources said that if no breakthrough is achieved in the next couple of days, the Secretary Finance and the Minister for Finance may dash to the United States to meet the top management of the IMF.
The coalition government had hoped that after increasing the petroleum products prices and starting the process for approval of increase in electricity prices, the IMF may agree to reach a staff level agreement.
However, the IMF also wants not only a reversal of cut in the income tax rates for the salaried class but is seeking to pass on an additional burden of Rs125 billion on the salaried people. The government has now worked out a new proposal that entails reversing Rs47 billion tax relief and then passing on additional burden of Rs18 billion to the salaried class, the sources added.
The previous government had committed to increase the taxes on the salaried class with effect from July and also agreed to share the draft of the personal income tax reforms with the IMF by end of February 2022. The PTI did not fulfill its commitments.
The government has already massively increased the fuel prices and abolished all subsidies. But the IMF is now seeking reintroduction of the petroleum levy and sales tax over and above the existing prices, said the sources.
While talking to the media after the Senate Standing Committee on Finance meeting, Minister of State for Finance Dr Aisha Pasha said that there was now more clarity to the IMF on the new budget, hoping to sign a deal very soon.
Express Tribune
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- Oct 2, 2004
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ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have not yet been able to reach close to a staff-level agreement for revival of the Extended Fund Facility (EFF), leaving authorities in a tight spot to bridge the gap and get the updated federal budget for the fiscal year 2022-23 passed by the National Assembly.
The authorities in the finance ministry were expecting to conclude the staff-level agreement by Sunday (June 19) on the basis of revenue and expenditure measures that could deliver next year’s primary budget (the difference between revenues and expenditures, excluding interest payment) in Rs152 billion surplus.
However, the IMF staff still has reservations over Rs9.5 trillion expenditures projected by the authorities for the next fiscal year. The revenue measures in the budget, according to IMF estimates, are also insufficient to deliver slightly over Rs7tr target.
A top finance ministry official confirmed on Sunday night that they had not yet received the first draft of memorandum of economic and financial policies (MEFP) from the IMF as targeted earlier because certain matters remained unsettled. “We are working very closely with the IMF and will soon reach some conclusion,” the official said.
The government is targeting to secure the passage of the budget 2022-23 from the National Assembly on June 27-28, according to the finance ministry’s schedule of events. For this to happen, it has to reach an agreement with the IMF so that the agreed measures could be protected in the budget. In any case, the budget has to be passed by parliament by 28 to legally ensure its implementation with effect from July 1, as required under the Constitution.
While the two sides remained divided over personal income tax slabs and rates, the federal authorities received another setback after the provinces came up with their budgets which created another shortfall of almost one per cent of gross domestic product (GDP) — apparently meaning that the primary account would be in a massive deficit — rather than Rs152bn surplus.
The federal government had projected Rs800bn cash surplus from the four provinces in the budget for next fiscal year. However, so far only the Punjab government announced a budget with Rs125bn surplus, while Sindh presented a Rs35bn deficit budget. Khyber Pakhtunkhwa has neither committed a surplus nor projected a deficit in its budget. Balochistan has not yet announced its budget, but is highly unlikely to provide any sizeable surplus.
Based on Rs800bn provincial surplus, the Centre had projected an overall budget deficit for the next fiscal year at Rs3.8tr or 4.9pc of GDP because it had estimated its own federal budget deficit at Rs4.6tr or 5.9pc of GDP. This means that unless the federal government is able to convince the provinces to curtail their expenditures or increase revenues, the primary account would be in Rs650bn deficit.
This comes at a time when the KP government was already running on overdraft to meet its expenditures during the current fiscal year. The Economic Coordination Committee (ECC) of the cabinet has approved a supplementary grant — budget overrun — of Rs115bn for KP as late as last week i.e. after the presentation of the federal budget.
In a report last week, the finance ministry had reported to the ECC that the federal government had, under an IMF conditionality, prohibited borrowing from the State Bank of Pakistan by the federal and provincial governments. Prior to these IMF-sponsored reforms, the provinces were availing ways and means advances (overdraft facility) from the SBP.
In order to enable the provinces to continue availing such advances after the prohibition, the ECC had in June 2020 put in place a new lending policy for the provincial governments, besides enhancing their ways and means limits. Under that policy, the facility of ways and means advances is provided to the provincial governments by the Centre instead of the SBP.
In this regard, tri-partite agreements have been signed with all the four provinces. The agreement authorises the SBP to debit/credit federal and provincial government accounts as and when a province is in need of ways and means advance or has sufficient balance to clear the advance availed by that province. The existing limit of the ways and means advances of the four provinces is about Rs164.3bn — Rs77bn for Punjab, Rs39bn for Sindh, Rs31.3bn for KP and Rs17bn for Balochistan.
The provision of Rs15bn under the head of ways and means advances to the provinces was included in the outgoing budget as federal miscellaneous investment and other loan and advances, but KP has availed Rs115bn cumulatively during the year as of June 9, 2022.
In order to adjust the expenditure of Rs100bn made by the KP government in excess of the allocated limit as well as likely future requirements of the provinces during the outgoing year, supplementary grant of Rs130bn was required for which schedule of supplementary grants for Rs100bn will be issued forthwith. However, schedule of supplementary grants for the balance amount will be issued on a need basis as per ways and means advances availed by the provinces.
The finance ministry explained that this expenditure would have no impact on the overall fiscal deficit of the federal government as the payments are for a limited time period and as and when cash balance position of the provinces improves, as a result of divisible pool transfers, the SBP reverses the transaction together with mark-up and the same is booked as capital receipts/non-tax receipts of the federal government.
Published in Dawn, June 20th, 2022
The authorities in the finance ministry were expecting to conclude the staff-level agreement by Sunday (June 19) on the basis of revenue and expenditure measures that could deliver next year’s primary budget (the difference between revenues and expenditures, excluding interest payment) in Rs152 billion surplus.
However, the IMF staff still has reservations over Rs9.5 trillion expenditures projected by the authorities for the next fiscal year. The revenue measures in the budget, according to IMF estimates, are also insufficient to deliver slightly over Rs7tr target.
A top finance ministry official confirmed on Sunday night that they had not yet received the first draft of memorandum of economic and financial policies (MEFP) from the IMF as targeted earlier because certain matters remained unsettled. “We are working very closely with the IMF and will soon reach some conclusion,” the official said.
The government is targeting to secure the passage of the budget 2022-23 from the National Assembly on June 27-28, according to the finance ministry’s schedule of events. For this to happen, it has to reach an agreement with the IMF so that the agreed measures could be protected in the budget. In any case, the budget has to be passed by parliament by 28 to legally ensure its implementation with effect from July 1, as required under the Constitution.
While the two sides remained divided over personal income tax slabs and rates, the federal authorities received another setback after the provinces came up with their budgets which created another shortfall of almost one per cent of gross domestic product (GDP) — apparently meaning that the primary account would be in a massive deficit — rather than Rs152bn surplus.
The federal government had projected Rs800bn cash surplus from the four provinces in the budget for next fiscal year. However, so far only the Punjab government announced a budget with Rs125bn surplus, while Sindh presented a Rs35bn deficit budget. Khyber Pakhtunkhwa has neither committed a surplus nor projected a deficit in its budget. Balochistan has not yet announced its budget, but is highly unlikely to provide any sizeable surplus.
Based on Rs800bn provincial surplus, the Centre had projected an overall budget deficit for the next fiscal year at Rs3.8tr or 4.9pc of GDP because it had estimated its own federal budget deficit at Rs4.6tr or 5.9pc of GDP. This means that unless the federal government is able to convince the provinces to curtail their expenditures or increase revenues, the primary account would be in Rs650bn deficit.
This comes at a time when the KP government was already running on overdraft to meet its expenditures during the current fiscal year. The Economic Coordination Committee (ECC) of the cabinet has approved a supplementary grant — budget overrun — of Rs115bn for KP as late as last week i.e. after the presentation of the federal budget.
In a report last week, the finance ministry had reported to the ECC that the federal government had, under an IMF conditionality, prohibited borrowing from the State Bank of Pakistan by the federal and provincial governments. Prior to these IMF-sponsored reforms, the provinces were availing ways and means advances (overdraft facility) from the SBP.
In order to enable the provinces to continue availing such advances after the prohibition, the ECC had in June 2020 put in place a new lending policy for the provincial governments, besides enhancing their ways and means limits. Under that policy, the facility of ways and means advances is provided to the provincial governments by the Centre instead of the SBP.
In this regard, tri-partite agreements have been signed with all the four provinces. The agreement authorises the SBP to debit/credit federal and provincial government accounts as and when a province is in need of ways and means advance or has sufficient balance to clear the advance availed by that province. The existing limit of the ways and means advances of the four provinces is about Rs164.3bn — Rs77bn for Punjab, Rs39bn for Sindh, Rs31.3bn for KP and Rs17bn for Balochistan.
The provision of Rs15bn under the head of ways and means advances to the provinces was included in the outgoing budget as federal miscellaneous investment and other loan and advances, but KP has availed Rs115bn cumulatively during the year as of June 9, 2022.
In order to adjust the expenditure of Rs100bn made by the KP government in excess of the allocated limit as well as likely future requirements of the provinces during the outgoing year, supplementary grant of Rs130bn was required for which schedule of supplementary grants for Rs100bn will be issued forthwith. However, schedule of supplementary grants for the balance amount will be issued on a need basis as per ways and means advances availed by the provinces.
The finance ministry explained that this expenditure would have no impact on the overall fiscal deficit of the federal government as the payments are for a limited time period and as and when cash balance position of the provinces improves, as a result of divisible pool transfers, the SBP reverses the transaction together with mark-up and the same is booked as capital receipts/non-tax receipts of the federal government.
Published in Dawn, June 20th, 2022
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- Mar 19, 2015
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- 15,745
IMF will revive stalled bailout package in ‘a day or two’: Miftah
ISLAMABAD: Finance Minister Miftah Ismail has expressed hope that the government would reach an agreement with the International Monetary Fund (IMF) to revive the stalled $6 billion programme within "a day or two".
He made the remarks while speaking to reporters at the Parliament House in Islamabad on Monday.
Responding to a question, Miftah said the IMF did not have any objection over the increase in the salaries of the government employees.
He also added that income tax exemption announced for salaried individuals will not be withdrawn and the government will shield those earning less than Rs1.2 million annually.
The finance minister said only the rich will be taxed while the poor will be given a relief.
The government is looking for new avenues to increase burden on the rich and may impose taxes on gifts, jack up rates for corporate sectors as well as allow unconditional import of gold to bring it into the tax ambit.
Other measures are also being considered to bridge gaps with the International Monetary Fund before the end of the month. The global lender still sees the government’s budget numbers unrealistic that require more taxation measures along with cuts in expenditures.
The Finance Bill 2022-23 that Miftah Ismail tabled in the National Assembly on June 10 may undergo some major changes to raise maximum tax from the rich.
In addition to finding more sources of income to the satisfaction of the IMF, the government also wants to give a message to the less-privileged classes that the elite class is also paying more than their usual annual tax contribution, according to the sources.
Pakistan is halfway through a $6 billion, 39-month IMF programme that had stalled over the lender's concerns over the status of some of its objectives, including fiscal consolidation.
The next tranche that Pakistan is to receive upon a successful review is $900 million, and a green light from the IMF would also open up other global funding avenues.
https://tribune.com.pk/story/2362485/imf-will-revive-stalled-bailout-package-in-a-day-or-two-miftah
ISLAMABAD: Finance Minister Miftah Ismail has expressed hope that the government would reach an agreement with the International Monetary Fund (IMF) to revive the stalled $6 billion programme within "a day or two".
He made the remarks while speaking to reporters at the Parliament House in Islamabad on Monday.
Responding to a question, Miftah said the IMF did not have any objection over the increase in the salaries of the government employees.
He also added that income tax exemption announced for salaried individuals will not be withdrawn and the government will shield those earning less than Rs1.2 million annually.
The finance minister said only the rich will be taxed while the poor will be given a relief.
The government is looking for new avenues to increase burden on the rich and may impose taxes on gifts, jack up rates for corporate sectors as well as allow unconditional import of gold to bring it into the tax ambit.
Other measures are also being considered to bridge gaps with the International Monetary Fund before the end of the month. The global lender still sees the government’s budget numbers unrealistic that require more taxation measures along with cuts in expenditures.
The Finance Bill 2022-23 that Miftah Ismail tabled in the National Assembly on June 10 may undergo some major changes to raise maximum tax from the rich.
In addition to finding more sources of income to the satisfaction of the IMF, the government also wants to give a message to the less-privileged classes that the elite class is also paying more than their usual annual tax contribution, according to the sources.
Pakistan is halfway through a $6 billion, 39-month IMF programme that had stalled over the lender's concerns over the status of some of its objectives, including fiscal consolidation.
The next tranche that Pakistan is to receive upon a successful review is $900 million, and a green light from the IMF would also open up other global funding avenues.
https://tribune.com.pk/story/2362485/imf-will-revive-stalled-bailout-package-in-a-day-or-two-miftah
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Prime Minister Shehbaz Sharif on Tuesday said that the government was prepared to take "difficult decisions" to provide relief to the poorer segments of the society even if it came at the expense of affluent groups.
Speaking to the media after the weekly cabinet meeting in Islamabad, the PM expressed optimism over the government's ability to overcome the current economic crisis as he sought the support of the country's richer strata.
Blaming the "imprudent" economic policies of the previous Pakistan Tehreek-e-Insaaf (PTI) government for the country's woes, Shehbaz assured the nation that the government was doing everything in its power to turn the situation around.
“The previous government did not work for the betterment of the people and also breached the agreement signed with the International Monetary Fund (IMF),” he said.
Shehbaz added that despite increasing prices of petroleum products in the international market, "the previous government reduced the price of petrol and laid a trap for the next government”.
He also stated that his government is giving Rs2,000 to millions of people through the Benazir Income Support Programme (BISP). The policy was rolled out earlier this month whereby the government had announced a monthly subsidy to all those earning less than Rs40,000 a month so that they could absorb inflationary pressures after the increase in petroleum prices.
He also said that the government has decided to impose taxes on the rich in the budget for the fiscal year 2022-23 to decrease pressure on the working class.
On Monday Finance Minister Miftah Ismail had expressed optimism over the stalled $6 billion bailout deal with IMF after the government considered increasing the tax target to around Rs7.45 trillion and adjusted some expenses.
The finance minister had told The Express Tribune that the fiscal framework with the IMF had almost been finalised. “God willing, the IMF deal will be finalised in a day or so,” he had said while responding to a question.
Express Tribune
Speaking to the media after the weekly cabinet meeting in Islamabad, the PM expressed optimism over the government's ability to overcome the current economic crisis as he sought the support of the country's richer strata.
Blaming the "imprudent" economic policies of the previous Pakistan Tehreek-e-Insaaf (PTI) government for the country's woes, Shehbaz assured the nation that the government was doing everything in its power to turn the situation around.
“The previous government did not work for the betterment of the people and also breached the agreement signed with the International Monetary Fund (IMF),” he said.
Shehbaz added that despite increasing prices of petroleum products in the international market, "the previous government reduced the price of petrol and laid a trap for the next government”.
He also stated that his government is giving Rs2,000 to millions of people through the Benazir Income Support Programme (BISP). The policy was rolled out earlier this month whereby the government had announced a monthly subsidy to all those earning less than Rs40,000 a month so that they could absorb inflationary pressures after the increase in petroleum prices.
He also said that the government has decided to impose taxes on the rich in the budget for the fiscal year 2022-23 to decrease pressure on the working class.
On Monday Finance Minister Miftah Ismail had expressed optimism over the stalled $6 billion bailout deal with IMF after the government considered increasing the tax target to around Rs7.45 trillion and adjusted some expenses.
The finance minister had told The Express Tribune that the fiscal framework with the IMF had almost been finalised. “God willing, the IMF deal will be finalised in a day or so,” he had said while responding to a question.
Express Tribune
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France signed an agreement with Pakistan to suspend its loan worth $107 million under the G20 Debt Service Suspension Initiative (DSSI).
The agreement was signed by Ministry of Economic Affairs Secretary Mian Asad Hayaud Din and French Ambassador Nicolas Galey, the Economic Affairs Division of Pakistan said in a statement on Monday.
The agreement was signed by Ministry of Economic Affairs Secretary Mian Asad Hayaud Din and French Ambassador Nicolas Galey, the Economic Affairs Division of Pakistan said in a statement on Monday.
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China has again rushed to bail out Pakistan by providing $2.5 billion in assistance to prop up the fast-depleting foreign exchange reserves of its cash-strapped all-weather ally, months after it rolled over a $4.5 billion loan due to be paid this year.
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While refuting reports about the suspension of the International Monetary Fund (IMF) programme, Finance Minister Miftah Ismail said on Monday that the programme is "on track".
"I have been reading with some amusement all the tweets and stories about [the] IMF programme being postponed or delayed due to some anti-corruption law," the federal minister wrote on his official Twitter handle.
"There is no truth to it. The IMF programme is on track," he also wrote on the microblogging site.
Miftah was responding to a news report which claimed that the IMF was seeking the review of laws pertaining to the National Accountability Bureau (NAB), adding that "the government is willing to implement other financial measures, except the ones related to NAB".
The Express Tribune, late last month, had reported that to revive its stalled $6 billion loan programme, the IMF has set four tough prior conditions -- increasing electricity tariffs, the cabinet taking the decision to gradually impose Rs50 per litre petroleum levy to collect Rs855 billion, and ending the government’s role in determining the oil prices.
The IMF has also asked Pakistan to set up an anti-corruption task force to review all the existing laws that were aimed at curbing graft in the government departments, according to sources.
After implementing the conditions, the IMF would present Pakistan’s request for the approval of the loan tranche and revival of the programme to its executive board – a process that may consume another month, the sources added.
In its draft Memorandum for Economic and Financial Policies (MEFP) document, the IMF has proposed to club the two pending programme reviews – the 7th and 8th – but did not indicate that it would also approve loan tranches of $2 billion.
The MEFP will form the basis for the staff-level agreement that now Pakistani authorities will try to achieve at the earliest.
However, the finance minister said Pakistan had received the MEFP document that showed the merger of the seventh and eighth reviews of the bailout programme and the country would receive a $1.9 billion loan after their approval. He has already informed Prime Minister Shehbaz Sharif about this development.
The existing IMF programme shows that the approval of the 6th and 7th review by the Executive Board of the IMF should pave the way for the release of roughly $960 million worth of two loan tranches, totalling $1.9 billion. However, this schedule will be amended after the merger of the two reviews.
The sources said that in its draft MEFP document, the IMF did not mention to increase the loan tranche size to $1.9 billion. The issue of increasing the loan size will now be discussed by both sides.
The finance minister told The Express Tribune that Pakistan had requested the IMF to double the loan tranche size to $2 billion. He said that nothing was final yet but the loan amount size could be around $1.5 billion.
Pakistan did not receive the complete MEFP and some of the important tables would be shared by the global lender in a couple of days. Pakistan and the IMF officials also recently held virtual discussions to seek further clarity on the draft MEFP.
The IMF’s decision to merge the 7th and 8th programme reviews was also surprising for Pakistani authorities, as no recent discussions had taken place on the topic, although Islamabad had made a request for the merger during Miftah’s visit to Washington.
In the recent past, Miftah had ruled out the possibility of clubbing both the reviews.
Earlier, the IMF had also clubbed four reviews – second to fifth reviews – but without increasing the loan tranche size. The IMF had only given $500 million as against the $2 billion of four reviews.
The existing document showed that the 7th review was for the end of December 2021 period and the 8th review was for January-March 2022 quarter.
The sources said that the MEFP has indicated that the global lender could extend the programme by June next year but there was no explicit mention.
Express Tribune
"I have been reading with some amusement all the tweets and stories about [the] IMF programme being postponed or delayed due to some anti-corruption law," the federal minister wrote on his official Twitter handle.
"There is no truth to it. The IMF programme is on track," he also wrote on the microblogging site.
Miftah was responding to a news report which claimed that the IMF was seeking the review of laws pertaining to the National Accountability Bureau (NAB), adding that "the government is willing to implement other financial measures, except the ones related to NAB".
The Express Tribune, late last month, had reported that to revive its stalled $6 billion loan programme, the IMF has set four tough prior conditions -- increasing electricity tariffs, the cabinet taking the decision to gradually impose Rs50 per litre petroleum levy to collect Rs855 billion, and ending the government’s role in determining the oil prices.
The IMF has also asked Pakistan to set up an anti-corruption task force to review all the existing laws that were aimed at curbing graft in the government departments, according to sources.
After implementing the conditions, the IMF would present Pakistan’s request for the approval of the loan tranche and revival of the programme to its executive board – a process that may consume another month, the sources added.
In its draft Memorandum for Economic and Financial Policies (MEFP) document, the IMF has proposed to club the two pending programme reviews – the 7th and 8th – but did not indicate that it would also approve loan tranches of $2 billion.
The MEFP will form the basis for the staff-level agreement that now Pakistani authorities will try to achieve at the earliest.
However, the finance minister said Pakistan had received the MEFP document that showed the merger of the seventh and eighth reviews of the bailout programme and the country would receive a $1.9 billion loan after their approval. He has already informed Prime Minister Shehbaz Sharif about this development.
The existing IMF programme shows that the approval of the 6th and 7th review by the Executive Board of the IMF should pave the way for the release of roughly $960 million worth of two loan tranches, totalling $1.9 billion. However, this schedule will be amended after the merger of the two reviews.
The sources said that in its draft MEFP document, the IMF did not mention to increase the loan tranche size to $1.9 billion. The issue of increasing the loan size will now be discussed by both sides.
The finance minister told The Express Tribune that Pakistan had requested the IMF to double the loan tranche size to $2 billion. He said that nothing was final yet but the loan amount size could be around $1.5 billion.
Pakistan did not receive the complete MEFP and some of the important tables would be shared by the global lender in a couple of days. Pakistan and the IMF officials also recently held virtual discussions to seek further clarity on the draft MEFP.
The IMF’s decision to merge the 7th and 8th programme reviews was also surprising for Pakistani authorities, as no recent discussions had taken place on the topic, although Islamabad had made a request for the merger during Miftah’s visit to Washington.
In the recent past, Miftah had ruled out the possibility of clubbing both the reviews.
Earlier, the IMF had also clubbed four reviews – second to fifth reviews – but without increasing the loan tranche size. The IMF had only given $500 million as against the $2 billion of four reviews.
The existing document showed that the 7th review was for the end of December 2021 period and the 8th review was for January-March 2022 quarter.
The sources said that the MEFP has indicated that the global lender could extend the programme by June next year but there was no explicit mention.
Express Tribune
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Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) to resume its loan programme, reported Bloomberg on Wednesday, quoting a government official familiar with the matter.
A $1.2-billion disbursement is expected in August after the IMF’s management gives final approval, the official, asking not to be identified before a formal announcement, was quoted as saying.
Business Recorder reached out to the IMF resident representative and the finance ministry, but did not receive a reply till the filing of this report.
However, reports indicate a formal announcement on Pakistan's Extended Fund Facility (EFF) would be made soon.
The revival of the programme is crucial for Pakistan that has seen its foreign exchange reserves fall relentlessly with import cover currently standing at less than two months. During the week ended on 30-Jun-2022, SBP’s reserves decreased by $493 million to $9.82 billion due to external debt and other payments.
At the same time, the rupee has consistently lost value against the dollar, and closed at 210.1 on Wednesday after falling another 1.04%.
Meanwhile, the Bloomberg report added that the Washington-based lender has also agreed to increase the loan programme size by $1 billion, taking it to a total of $7 billion, and extend it through June 2023.
Finance Minister Miftah Ismail had earlier said that Islamabad has requested the IMF to increase the size and duration of its $6-billion programme.
https://www.brecorder.com/news/4018...agreement-with-imf-to-resume-programme-report
A $1.2-billion disbursement is expected in August after the IMF’s management gives final approval, the official, asking not to be identified before a formal announcement, was quoted as saying.
Business Recorder reached out to the IMF resident representative and the finance ministry, but did not receive a reply till the filing of this report.
However, reports indicate a formal announcement on Pakistan's Extended Fund Facility (EFF) would be made soon.
The revival of the programme is crucial for Pakistan that has seen its foreign exchange reserves fall relentlessly with import cover currently standing at less than two months. During the week ended on 30-Jun-2022, SBP’s reserves decreased by $493 million to $9.82 billion due to external debt and other payments.
At the same time, the rupee has consistently lost value against the dollar, and closed at 210.1 on Wednesday after falling another 1.04%.
Meanwhile, the Bloomberg report added that the Washington-based lender has also agreed to increase the loan programme size by $1 billion, taking it to a total of $7 billion, and extend it through June 2023.
Finance Minister Miftah Ismail had earlier said that Islamabad has requested the IMF to increase the size and duration of its $6-billion programme.
https://www.brecorder.com/news/4018...agreement-with-imf-to-resume-programme-report
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The International Monetary Fund (IMF) team has reached a staff-level agreement (SLA) with Pakistan authorities for the conclusion of the combined seventh and eighth reviews of the Extended Fund Facility (EFF), with the agreement now subject to approval of the Executive Board, it was formally announced by the Washington-based lender early on Thursday.
“Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the programme to about $4.2 billion,” said the IMF in its statement.
Nathan Porter, who led the IMF team in the discussions, said in order to support programme implementation and meet the higher financing needs in fiscal year 2022-23, as well as catalyse additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR 720 million that will bring the total access under the EFF to about $7 billion.
Pakistan had sought an increase in the size and duration of its $6-billion programme in April.
“Pakistan is at a challenging economic juncture,” Porter was quoted as saying in the statement.
“A difficult external environment combined with procyclical domestic policies fuelled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers."
The statement added that to stabilise the economy and bring policy actions in line with the IMF-supported programme, policy priorities include the following:
Importantly, to enhance monetary policy transmission, the rates of the two major refinancing schemes EFS and LTFF (which have over recent months been raised by 700 bps and 500 bps, respectively) will continue to be linked to the policy rate: IMF statement
Steadfast implementation of the FY2023 budget
The budget aims to reduce the government’s large borrowing needs by targeting an underlying primary surplus of 0.4 percent of GDP, underpinned by current spending restraint and broad revenue mobilisation efforts focused particularly on higher income taxpayers.
"Development spending will be protected, and fiscal space will be created for expanding social support schemes.
"The provinces have agreed to support the federal government’s efforts to reach the fiscal targets, and Memoranda of Understanding have been signed by each provincial government to this effect."
Catch-up in power sector reforms
The IMF said that on the back of weak implementation of the previously-agreed plan, the power sector circular debt flow is expected to grow significantly to about Rs850 billion in FY22, overshooting programme targets, threatening the power sector’s viability, and leading to frequent power outages.
"The authorities are committed to resuming reforms including, critically, the timely adjustment of power tariff including for the delayed annual rebasing and quarterly adjustments, to improve the situation in the power sector and limit load shedding."
Authorities are establishing a robust electronic asset declaration system and plan to undertake a comprehensive review of the anti-corruption institutions (including the National Accountability Bureau): IMF statement
Proactive monetary policy to guide inflation to more moderate levels
Headline inflation exceeded 20 percent in June, hurting particularly the most vulnerable.
"In this regard, the recent monetary policy increase was necessary and appropriate, and monetary policy will need to be geared towards ensuring that inflation is brought steadily down to the medium-term objective of 5–7 percent."
Importantly, to enhance monetary policy transmission, the rates of the two major refinancing schemes EFS and LTFF (which have over recent months been raised by 700 bps and 500 bps, respectively) will continue to be linked to the policy rate. Greater exchange rate flexibility will help cushion activity and rebuild reserves to more prudent levels.
Reducing poverty and strengthen social safety
The IMF said that during FY22, unconditional cash transfer (UCT) Kafalat scheme reached nearly 8 million households, with a permanent increase in the stipend to Rs14,000 per family, while a one-off cash transfer of Rs2,000 (Sasta Fuel Sasta Diesel, SFSD) was granted to about 8.6 million families to alleviate the impact of rampant inflation.
"For FY23, the authorities have allocated Rs364 billion to BISP (up from Rs250 in FY22) to be able to bring 9 million families into the BISP safety net, and further extend the SFSD scheme to additional non-BISP, lower-middle class beneficiaries."
Strengthen governance
"To improve governance and mitigate corruption, the authorities are establishing a robust electronic asset declaration system and plan to undertake a comprehensive review of the anti-corruption institutions (including the National Accountability Bureau) to enhance their effectiveness in investigating and prosecuting corruption cases," the IMF stated.
It added that steadfast implementation of the outlined policies, underpinning the SLA for the combined seventh and eighth reviews, will help create the conditions for sustainable and more inclusive growth.
“The authorities should nonetheless stand ready to take any additional measures necessary to meet programme objectives, given the elevated uncertainty in the global economy and financial markets.”
Earlier, the federal capital was rife with speculation that the staff-level agreement between Pakistan and the IMF had been reached, and will be announced soon.
The revival of the programme is widely considered as crucial for Pakistan that has seen its foreign exchange reserves fall relentlessly with import cover currently standing at less than two months. During the week ended on 30-Jun-2022, SBP’s reserves decreased by $493 million to $9.82 billion due to external debt and other payments.
At the same time, the rupee has consistently lost value against the dollar, and closed at 210.1 on Wednesday after falling another 1.04%.
Pakistan entered the current IMF programme in 2019, but only half the funds have been disbursed to date.
https://www.brecorder.com/news/40185815/imf-announces-staff-level-agreement-with-pakistan
“Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the programme to about $4.2 billion,” said the IMF in its statement.
Nathan Porter, who led the IMF team in the discussions, said in order to support programme implementation and meet the higher financing needs in fiscal year 2022-23, as well as catalyse additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR 720 million that will bring the total access under the EFF to about $7 billion.
Pakistan had sought an increase in the size and duration of its $6-billion programme in April.
“Pakistan is at a challenging economic juncture,” Porter was quoted as saying in the statement.
“A difficult external environment combined with procyclical domestic policies fuelled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers."
The statement added that to stabilise the economy and bring policy actions in line with the IMF-supported programme, policy priorities include the following:
Importantly, to enhance monetary policy transmission, the rates of the two major refinancing schemes EFS and LTFF (which have over recent months been raised by 700 bps and 500 bps, respectively) will continue to be linked to the policy rate: IMF statement
Steadfast implementation of the FY2023 budget
The budget aims to reduce the government’s large borrowing needs by targeting an underlying primary surplus of 0.4 percent of GDP, underpinned by current spending restraint and broad revenue mobilisation efforts focused particularly on higher income taxpayers.
"Development spending will be protected, and fiscal space will be created for expanding social support schemes.
"The provinces have agreed to support the federal government’s efforts to reach the fiscal targets, and Memoranda of Understanding have been signed by each provincial government to this effect."
Catch-up in power sector reforms
The IMF said that on the back of weak implementation of the previously-agreed plan, the power sector circular debt flow is expected to grow significantly to about Rs850 billion in FY22, overshooting programme targets, threatening the power sector’s viability, and leading to frequent power outages.
"The authorities are committed to resuming reforms including, critically, the timely adjustment of power tariff including for the delayed annual rebasing and quarterly adjustments, to improve the situation in the power sector and limit load shedding."
Authorities are establishing a robust electronic asset declaration system and plan to undertake a comprehensive review of the anti-corruption institutions (including the National Accountability Bureau): IMF statement
Proactive monetary policy to guide inflation to more moderate levels
Headline inflation exceeded 20 percent in June, hurting particularly the most vulnerable.
"In this regard, the recent monetary policy increase was necessary and appropriate, and monetary policy will need to be geared towards ensuring that inflation is brought steadily down to the medium-term objective of 5–7 percent."
Importantly, to enhance monetary policy transmission, the rates of the two major refinancing schemes EFS and LTFF (which have over recent months been raised by 700 bps and 500 bps, respectively) will continue to be linked to the policy rate. Greater exchange rate flexibility will help cushion activity and rebuild reserves to more prudent levels.
Reducing poverty and strengthen social safety
The IMF said that during FY22, unconditional cash transfer (UCT) Kafalat scheme reached nearly 8 million households, with a permanent increase in the stipend to Rs14,000 per family, while a one-off cash transfer of Rs2,000 (Sasta Fuel Sasta Diesel, SFSD) was granted to about 8.6 million families to alleviate the impact of rampant inflation.
"For FY23, the authorities have allocated Rs364 billion to BISP (up from Rs250 in FY22) to be able to bring 9 million families into the BISP safety net, and further extend the SFSD scheme to additional non-BISP, lower-middle class beneficiaries."
Strengthen governance
"To improve governance and mitigate corruption, the authorities are establishing a robust electronic asset declaration system and plan to undertake a comprehensive review of the anti-corruption institutions (including the National Accountability Bureau) to enhance their effectiveness in investigating and prosecuting corruption cases," the IMF stated.
It added that steadfast implementation of the outlined policies, underpinning the SLA for the combined seventh and eighth reviews, will help create the conditions for sustainable and more inclusive growth.
“The authorities should nonetheless stand ready to take any additional measures necessary to meet programme objectives, given the elevated uncertainty in the global economy and financial markets.”
Earlier, the federal capital was rife with speculation that the staff-level agreement between Pakistan and the IMF had been reached, and will be announced soon.
The revival of the programme is widely considered as crucial for Pakistan that has seen its foreign exchange reserves fall relentlessly with import cover currently standing at less than two months. During the week ended on 30-Jun-2022, SBP’s reserves decreased by $493 million to $9.82 billion due to external debt and other payments.
At the same time, the rupee has consistently lost value against the dollar, and closed at 210.1 on Wednesday after falling another 1.04%.
Pakistan entered the current IMF programme in 2019, but only half the funds have been disbursed to date.
https://www.brecorder.com/news/40185815/imf-announces-staff-level-agreement-with-pakistan
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<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Congratulations to our Finance & Foreign Office teams led ably by Ministers Miftah Ismail & Bilawal Bhutto for their efforts in getting the IMF program revived. It was a great team work. The Agreement with the Fund has set the stage to bring country out of economic difficulties.</p>— Shehbaz Sharif (@CMShehbaz) <a href="https://twitter.com/CMShehbaz/status/1547466384845717506?ref_src=twsrc%5Etfw">July 14, 2022</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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After clinching deal with IMF, Pakistan plans to generate around $10bn in loans
Miftah Ismail says IMF’s executive board meeting would be held after second week of August for approving Pakistan’s request
ISLAMABAD: After striking a staff level agreement with the IMF, Pakistan has made plans to generate approximately $9 to $10 billion in loans from other multilateral creditors, including the World Bank, Asian Development Bank and Islamic Development Bank through programme and project lending during the current fiscal year.
The revival of the IMF program will pave the way for provision of a Letter of Comfort (LoC) from the Fund and the revival of program/policy lending from the WB, ADB and IDB. The IMF’s Executive Board is expected to meet after the second week of August 2022 for considering the combined approval of the 7th and 8th Reviews and the release of $1.17 billion tranche under the Extended Fund Facility (EFF).
However, the revival of the IMF program hinges upon price increases only, and the Fund failed to mention any desired structural reforms for removing bottlenecks of the economy that ultimately resulted in the surfacing of twin deficits, known as the budget deficit and the current account deficit. The IMF literally ignored the rising inflation in its statement on the occasion of striking staff level agreement with Pakistani authorities, giving strength to the perception that Washington-based lender is totally indifferent to miseries being faced by inflation-stricken middle income salaried and pensioners.
The flow of circular debt touching Rs850 billion has raised many eyebrows because there is total electricity billing of Rs1,600 billion out of which piling up of circular debt of Rs850 billion caused shocks and alarm bells among the policymakers.
The IMF statement also confirmed that the government had allocated Rs68 billion to Rs72 for provision of Sasta Petrol and Sasta Diesel, which is a peanut amount in the aftermath of escalating inflationary pressures.
When contacted about plans for the IMF’s executive board meeting, Minister for Finance Miftah Ismail on Thursday said that it would be held after second week of August 2022 for approving Pakistan’s request for release of $1.17 billion tranche.
To another query regarding resumption of program loans from other multilateral creditors, Miftah Ismail replied that Pakistan was expecting $9 billion as budgetary/project loans and there would be a separate amount from the IMF as well. So, in totality, there are indications that Islamabad will muster up dollar loans of approximately $10 billion from multilateral creditors during the current fiscal year 2022-23.
A statement issued by the IMF on Thursday morning stated that an International Monetary Fund (IMF) team, led by Nathan Porter, has finalized discussions for the combined seventh and eight reviews of Pakistan’s economic program supported by an IMF Extended Fund Facility (EFF). At the conclusion of the discussions, Porter stated, “The IMF team has reached a staff-level agreement (SLA) with the Pakistan authorities for the conclusion of the combined seventh and eight reviews of the EFF-supported program. The agreement is subject to approval by the IMF’s Executive Board. Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the program to about $4.2 billion. Additionally, in order to support program implementation and meet the higher financing needs in FY23, as well as catalyze additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR720 million that will bring the total access under the EFF to about US$7 billion.
“Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fuelled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers.
“To stabilise the economy and bring policy actions in line with the IMF-supported program, while protecting the vulnerable, policy priorities include: steadfast implementation of the FY2023 budget. The budget aims to reduce the government’s large borrowing needs by targeting an underlying primary surplus of 0.4 percent of GDP, underpinned by current spending restraint and broad revenue mobilisation efforts focused particularly on higher income taxpayers. Development spending will be protected, and fiscal space will be created for expanding social support schemes. The provinces have agreed to support the federal government’s efforts to reach the fiscal targets, and Memoranda of Understanding have been signed by each provincial government to this effect.
“Catch-up in power sector reforms: On the back of weak implementation of the previously agreed plan, the power sector circular debt (CD) flow is expected to grow significantly to about PRs850 billion in FY22, overshooting program targets, threatening the power sector’s viability, and leading to frequent power outages. The authorities are committed to resuming reforms including, critically, the timely adjustment of power tariff including for the delayed annual rebasing and quarterly adjustments, to improve the situation in the power sector and limit loadshedding.
“Proactive monetary policy to guide inflation to more moderate levels. Headline inflation exceeded 20 percent in June, hurting particularly the most vulnerable. In this regard, the recent monetary policy increase was necessary and appropriate, and monetary policy will need to be geared towards ensuring that inflation is brought steadily down to the medium-term objective of 5–7 percent. Importantly, to enhance monetary policy transmission, the rates of the two major refinancing schemes EFS and LTFF (which have over recent months been raised by 700 bps and 500 bps respectively) will continue to be linked to the policy rate. Greater exchange rate flexibility will help cushion activity and rebuild reserves to more prudent levels.
“Reducing poverty and strengthen social safety: During FY22, the unconditional cash transfer (UCT) Kafalat scheme reached nearly 8 million households, with a permanent increase in the stipend to PRs14,000 per family, while a one-off cash transfer of PRs2,000 (Sasta Fuel Sasta Diesel, SFSD) was granted to about 8.6 million families to alleviate the impact of rampant inflation. For FY23, the authorities have allocated PRs364 billion to BISP (up from PRs 250 in FY22) to be able to bring 9 million families into the BISP safety net, and further extend the SFSD scheme to additional non-BISP, lower-middle class beneficiaries.
“Strengthen governance: To improve governance and mitigate corruption, the authorities are establishing a robust electronic asset declaration system and plan to undertake a comprehensive review of the anticorruption institutions (including the National Accountability Bureau) to enhance their effectiveness in investigating and prosecuting corruption cases.
“Steadfast implementation of the outlined policies, underpinning the SLA for the combined seventh and eighth reviews, will help create the conditions for sustainable and more inclusive growth. The authorities should nonetheless stand ready to take any additional measures necessary to meet program objectives, given the elevated uncertainty in the global economy and financial markets.
“The IMF team thanks the Pakistani authorities, private sector, and development partners for fruitful discussions and cooperation during the discussions.” When contacted, Dr Khaqan Najeeb, former adviser Ministry of Finance, said it was indeed comforting to see that Pakistan and the IMF have reached a staff-level agreement. “This paves the way for the completion of the 7th and the 8th Review. It should alleviate fears of a near-term challenging scenario and unlock funding from other multilateral lenders and friendly countries. All this should help build Pakistan’s foreign exchange reserves that have fallen below $10 billion. One hopes that this will calm the FX and Euro bonds market which have been quite uneasy for the past few months.”
He explained it would be wise to think of the next few months as breathing space, with realization of the severity of challenges both on the domestic and global front. The energy sector would be the most challenging. The circular debt of Rs850 billion reached in FY22 in the power sector is far above what one would have hoped and seriously threatens financial viability of the power sector at a time of global energy shortages.
Much beyond pricing adjustments are needed to create sustainability, including reforms of DISCOs, a new tariff, strengthening the policy and regulatory environment besides negotiation with IPPs, he concluded.
The News PK
Miftah Ismail says IMF’s executive board meeting would be held after second week of August for approving Pakistan’s request
ISLAMABAD: After striking a staff level agreement with the IMF, Pakistan has made plans to generate approximately $9 to $10 billion in loans from other multilateral creditors, including the World Bank, Asian Development Bank and Islamic Development Bank through programme and project lending during the current fiscal year.
The revival of the IMF program will pave the way for provision of a Letter of Comfort (LoC) from the Fund and the revival of program/policy lending from the WB, ADB and IDB. The IMF’s Executive Board is expected to meet after the second week of August 2022 for considering the combined approval of the 7th and 8th Reviews and the release of $1.17 billion tranche under the Extended Fund Facility (EFF).
However, the revival of the IMF program hinges upon price increases only, and the Fund failed to mention any desired structural reforms for removing bottlenecks of the economy that ultimately resulted in the surfacing of twin deficits, known as the budget deficit and the current account deficit. The IMF literally ignored the rising inflation in its statement on the occasion of striking staff level agreement with Pakistani authorities, giving strength to the perception that Washington-based lender is totally indifferent to miseries being faced by inflation-stricken middle income salaried and pensioners.
The flow of circular debt touching Rs850 billion has raised many eyebrows because there is total electricity billing of Rs1,600 billion out of which piling up of circular debt of Rs850 billion caused shocks and alarm bells among the policymakers.
The IMF statement also confirmed that the government had allocated Rs68 billion to Rs72 for provision of Sasta Petrol and Sasta Diesel, which is a peanut amount in the aftermath of escalating inflationary pressures.
When contacted about plans for the IMF’s executive board meeting, Minister for Finance Miftah Ismail on Thursday said that it would be held after second week of August 2022 for approving Pakistan’s request for release of $1.17 billion tranche.
To another query regarding resumption of program loans from other multilateral creditors, Miftah Ismail replied that Pakistan was expecting $9 billion as budgetary/project loans and there would be a separate amount from the IMF as well. So, in totality, there are indications that Islamabad will muster up dollar loans of approximately $10 billion from multilateral creditors during the current fiscal year 2022-23.
A statement issued by the IMF on Thursday morning stated that an International Monetary Fund (IMF) team, led by Nathan Porter, has finalized discussions for the combined seventh and eight reviews of Pakistan’s economic program supported by an IMF Extended Fund Facility (EFF). At the conclusion of the discussions, Porter stated, “The IMF team has reached a staff-level agreement (SLA) with the Pakistan authorities for the conclusion of the combined seventh and eight reviews of the EFF-supported program. The agreement is subject to approval by the IMF’s Executive Board. Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the program to about $4.2 billion. Additionally, in order to support program implementation and meet the higher financing needs in FY23, as well as catalyze additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR720 million that will bring the total access under the EFF to about US$7 billion.
“Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fuelled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers.
“To stabilise the economy and bring policy actions in line with the IMF-supported program, while protecting the vulnerable, policy priorities include: steadfast implementation of the FY2023 budget. The budget aims to reduce the government’s large borrowing needs by targeting an underlying primary surplus of 0.4 percent of GDP, underpinned by current spending restraint and broad revenue mobilisation efforts focused particularly on higher income taxpayers. Development spending will be protected, and fiscal space will be created for expanding social support schemes. The provinces have agreed to support the federal government’s efforts to reach the fiscal targets, and Memoranda of Understanding have been signed by each provincial government to this effect.
“Catch-up in power sector reforms: On the back of weak implementation of the previously agreed plan, the power sector circular debt (CD) flow is expected to grow significantly to about PRs850 billion in FY22, overshooting program targets, threatening the power sector’s viability, and leading to frequent power outages. The authorities are committed to resuming reforms including, critically, the timely adjustment of power tariff including for the delayed annual rebasing and quarterly adjustments, to improve the situation in the power sector and limit loadshedding.
“Proactive monetary policy to guide inflation to more moderate levels. Headline inflation exceeded 20 percent in June, hurting particularly the most vulnerable. In this regard, the recent monetary policy increase was necessary and appropriate, and monetary policy will need to be geared towards ensuring that inflation is brought steadily down to the medium-term objective of 5–7 percent. Importantly, to enhance monetary policy transmission, the rates of the two major refinancing schemes EFS and LTFF (which have over recent months been raised by 700 bps and 500 bps respectively) will continue to be linked to the policy rate. Greater exchange rate flexibility will help cushion activity and rebuild reserves to more prudent levels.
“Reducing poverty and strengthen social safety: During FY22, the unconditional cash transfer (UCT) Kafalat scheme reached nearly 8 million households, with a permanent increase in the stipend to PRs14,000 per family, while a one-off cash transfer of PRs2,000 (Sasta Fuel Sasta Diesel, SFSD) was granted to about 8.6 million families to alleviate the impact of rampant inflation. For FY23, the authorities have allocated PRs364 billion to BISP (up from PRs 250 in FY22) to be able to bring 9 million families into the BISP safety net, and further extend the SFSD scheme to additional non-BISP, lower-middle class beneficiaries.
“Strengthen governance: To improve governance and mitigate corruption, the authorities are establishing a robust electronic asset declaration system and plan to undertake a comprehensive review of the anticorruption institutions (including the National Accountability Bureau) to enhance their effectiveness in investigating and prosecuting corruption cases.
“Steadfast implementation of the outlined policies, underpinning the SLA for the combined seventh and eighth reviews, will help create the conditions for sustainable and more inclusive growth. The authorities should nonetheless stand ready to take any additional measures necessary to meet program objectives, given the elevated uncertainty in the global economy and financial markets.
“The IMF team thanks the Pakistani authorities, private sector, and development partners for fruitful discussions and cooperation during the discussions.” When contacted, Dr Khaqan Najeeb, former adviser Ministry of Finance, said it was indeed comforting to see that Pakistan and the IMF have reached a staff-level agreement. “This paves the way for the completion of the 7th and the 8th Review. It should alleviate fears of a near-term challenging scenario and unlock funding from other multilateral lenders and friendly countries. All this should help build Pakistan’s foreign exchange reserves that have fallen below $10 billion. One hopes that this will calm the FX and Euro bonds market which have been quite uneasy for the past few months.”
He explained it would be wise to think of the next few months as breathing space, with realization of the severity of challenges both on the domestic and global front. The energy sector would be the most challenging. The circular debt of Rs850 billion reached in FY22 in the power sector is far above what one would have hoped and seriously threatens financial viability of the power sector at a time of global energy shortages.
Much beyond pricing adjustments are needed to create sustainability, including reforms of DISCOs, a new tariff, strengthening the policy and regulatory environment besides negotiation with IPPs, he concluded.
The News PK
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$1.17bn tranche to be released in three to six weeks: IMF
WASHINGTON: The International Monetary Fund (IMF) has said that its agreement with Pakistan would lead to a “straight away” disbursement of $1.17 billion to the country.
“It’s an agreement on a combined seventh and eighth review of the programme... that will translate into about $1.17 million being disbursed to Pakistan. Pretty much, straight away,” IMF’s Communication Director Gerry Rice said at a Thursday afternoon news briefing in Washington.
He said this brought the total disbursements from the IMF to Pakistan under the ongoing program to about $4.2 billion. Answering a question about the timeframe for releasing the tranche, the IMF official said the executive board is likely to meet anywhere between three to six weeks from now.
The IMF and Pakistan reached a staff-level agreement on Wednesday that they hoped would stabilise the country’s economy and depreciating currency. The IMF also hoped that it would bring down high inflation and end Pakistan’s political instability.
The agreement “could also unlock more funding for Pakistan, which in recent weeks has neared the brink of a balance of payments crisis,” Mr Rice said.
The IMF official noted that this was an agreement on a combined seventh and eighth review of the programme that the Fund has with Pakistan.
”And we’re hoping this will help to stabilise the economy and amongst other things help expand the social safety net to protect the most vulnerable; accelerate structural reforms; and help stabilise the macroeconomic situation in Pakistan,” he added.
”The announcement by the IMF will prove to be a much-needed shot in the arm for Pakistan’s ailing economy,” Aqdas Afzal, a Karachi-based analyst and assistant professor of economics at Habib University, told The New York Times. He noted that the sharp increase in energy prices after the invasion of Ukraine and rising commodity prices more generally had hurt the country.
The newspaper noted that reviving the loan programme and getting the economy back on track “have been a political litmus test for Pakistan’s new prime minister.”
The report also highlighted the government’s fear that the IMF-induced reforms could trigger “public backlash that could hurt PML-N’s chance of success in the next general elections.”
DAWN
WASHINGTON: The International Monetary Fund (IMF) has said that its agreement with Pakistan would lead to a “straight away” disbursement of $1.17 billion to the country.
“It’s an agreement on a combined seventh and eighth review of the programme... that will translate into about $1.17 million being disbursed to Pakistan. Pretty much, straight away,” IMF’s Communication Director Gerry Rice said at a Thursday afternoon news briefing in Washington.
He said this brought the total disbursements from the IMF to Pakistan under the ongoing program to about $4.2 billion. Answering a question about the timeframe for releasing the tranche, the IMF official said the executive board is likely to meet anywhere between three to six weeks from now.
The IMF and Pakistan reached a staff-level agreement on Wednesday that they hoped would stabilise the country’s economy and depreciating currency. The IMF also hoped that it would bring down high inflation and end Pakistan’s political instability.
The agreement “could also unlock more funding for Pakistan, which in recent weeks has neared the brink of a balance of payments crisis,” Mr Rice said.
The IMF official noted that this was an agreement on a combined seventh and eighth review of the programme that the Fund has with Pakistan.
”And we’re hoping this will help to stabilise the economy and amongst other things help expand the social safety net to protect the most vulnerable; accelerate structural reforms; and help stabilise the macroeconomic situation in Pakistan,” he added.
”The announcement by the IMF will prove to be a much-needed shot in the arm for Pakistan’s ailing economy,” Aqdas Afzal, a Karachi-based analyst and assistant professor of economics at Habib University, told The New York Times. He noted that the sharp increase in energy prices after the invasion of Ukraine and rising commodity prices more generally had hurt the country.
The newspaper noted that reviving the loan programme and getting the economy back on track “have been a political litmus test for Pakistan’s new prime minister.”
The report also highlighted the government’s fear that the IMF-induced reforms could trigger “public backlash that could hurt PML-N’s chance of success in the next general elections.”
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WASHINGTON: The International Monetary Fund (IMF) has said that its agreement with Pakistan would lead to a “straight away” disbursement of $1.17 billion to the country.
“It’s an agreement on a combined seventh and eighth review of the programme... that will translate into about $1.17 billion being disbursed to Pakistan. Pretty much, straight away,” IMF’s Communication Director Gerry Rice said at a Thursday afternoon news briefing in Washington.
He said this brought the total disbursements from the IMF to Pakistan under the ongoing program to about $4.2 billion. Answering a question about the timeframe for releasing the tranche, the IMF official said the executive board is likely to meet anywhere between three to six weeks from now.
The IMF and Pakistan reached a staff-level agreement on Wednesday that they hoped would stabilise the country’s economy and depreciating currency. The IMF also hoped that it would bring down high inflation and end Pakistan’s political instability.
The agreement “could also unlock more funding for Pakistan, which in recent weeks has neared the brink of a balance of payments crisis,” Mr Rice said.
The IMF official noted that this was an agreement on a combined seventh and eighth review of the programme that the Fund has with Pakistan.
”And we’re hoping this will help to stabilise the economy and amongst other things help expand the social safety net to protect the most vulnerable; accelerate structural reforms; and help stabilise the macroeconomic situation in Pakistan,” he added.
”The announcement by the IMF will prove to be a much-needed shot in the arm for Pakistan’s ailing economy,” Aqdas Afzal, a Karachi-based analyst and assistant professor of economics at Habib University, told The New York Times. He noted that the sharp increase in energy prices after the invasion of Ukraine and rising commodity prices more generally had hurt the country.
The newspaper noted that reviving the loan programme and getting the economy back on track “have been a political litmus test for Pakistan’s new prime minister.”
The report also highlighted the government’s fear that the IMF-induced reforms could trigger “public backlash that could hurt PML-N’s chance of success in the next general elections.”
Published in Dawn, July 16th, 2022
“It’s an agreement on a combined seventh and eighth review of the programme... that will translate into about $1.17 billion being disbursed to Pakistan. Pretty much, straight away,” IMF’s Communication Director Gerry Rice said at a Thursday afternoon news briefing in Washington.
He said this brought the total disbursements from the IMF to Pakistan under the ongoing program to about $4.2 billion. Answering a question about the timeframe for releasing the tranche, the IMF official said the executive board is likely to meet anywhere between three to six weeks from now.
The IMF and Pakistan reached a staff-level agreement on Wednesday that they hoped would stabilise the country’s economy and depreciating currency. The IMF also hoped that it would bring down high inflation and end Pakistan’s political instability.
The agreement “could also unlock more funding for Pakistan, which in recent weeks has neared the brink of a balance of payments crisis,” Mr Rice said.
The IMF official noted that this was an agreement on a combined seventh and eighth review of the programme that the Fund has with Pakistan.
”And we’re hoping this will help to stabilise the economy and amongst other things help expand the social safety net to protect the most vulnerable; accelerate structural reforms; and help stabilise the macroeconomic situation in Pakistan,” he added.
”The announcement by the IMF will prove to be a much-needed shot in the arm for Pakistan’s ailing economy,” Aqdas Afzal, a Karachi-based analyst and assistant professor of economics at Habib University, told The New York Times. He noted that the sharp increase in energy prices after the invasion of Ukraine and rising commodity prices more generally had hurt the country.
The newspaper noted that reviving the loan programme and getting the economy back on track “have been a political litmus test for Pakistan’s new prime minister.”
The report also highlighted the government’s fear that the IMF-induced reforms could trigger “public backlash that could hurt PML-N’s chance of success in the next general elections.”
Published in Dawn, July 16th, 2022
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Eyeing $4bn from friendly countries this month
ISLAMABAD: Pakistan is likely to get $4 billion from friendly countries this month to bridge a gap in foreign reserves highlighted by the International Monetary Fund, Finance Minister Miftah Ismail said, two days after sealing a deal with the lender.
The IMF reached a staff-level agreement with Pakistan on Thursday that would pave the way for a disbursement of $1.18bn. The board is also considering adding $1bn to a $6bn programme agreed in 2019.
“As per the IMF, there is a $4bn gap,” Mr Ismail told a news conference in Islamabad, referring to the shortfall in foreign reserves.
“We will, God willing, fill this gap in the month of July,” he said. “We think that we will get $1.2bn in deferred oil payment from a friendly country. We think that a foreign country will invest between $1.5bn to $2bn in stocks on a G2G (government-to-government) basis, and another friendly country will perhaps give us gas on deferred payment and yet another friendly country will make some deposits.”
Miftah expects $3.5bn from ADB, $2.5bn from World Bank and $400-500m from AIIB in current fiscal year
Depleting reserves, a widening current account deficit and the rupee’s depreciation against the dollar have left the nation facing a balance-of-payments crisis.
Without the IMF deal, which should open up other avenues for external finance, Mr Ismail said the country could have headed towards default.
He said the country would also get around $6bn from multilateral lenders this fiscal year, including $3.5bn from the Asian Development Bank and $2.5bn from the World Bank.
He said $400m to $500m was also expected from the Asian Infrastructure Investment Bank while the Islamic Development Bank was also likely to increase the funding.
‘Unpopular decisions’
The current government had to take tough and unpopular decisions to avert default, Mr Ismail said, blaming the previous administration for all the economic woes faced by the country.
He hoped the rupee would strengthen against the dollar soon after the IMF agreement was finalised, which was expected in the current month. Besides, he said the government was aiming to curb energy imports to $2.7bn this month from $3.7bn last month, which was also expected to take some pressure off the local currency.
However, he stressed that adhering to strict fiscal and financial discipline was vital to put the economy on a fast track, have sustainable economic development and attain social prosperity.
The press conference was heavily tilted towards criticising the “mismanagement and bad governance” of the previous PTI-led government, which Mr Ismail said was incapable and inefficient and pushed the country on the verge of economic default.
During the first three years of the PTI government, the budget deficit hit a historically high level of Rs3.41 trillion compared to Rs1.66tr during PML-N’s five-year tenure from 2013 to 2018.
Net debt and liabilities grew 78pc during the first three years of the PTI government to Rs53.54tr from Rs23.67tr, he said, adding that the country witnessed historic high deficits and a free fall of the rupee.
The tax-to-GDP ratio came down to 9pc according to new GDP, he said, adding that the PML-N government had left the ratio at 11pc.
He said that delay in decision-making, poor commitments with international lending institutions, particularly with the IMF, also proved disastrous for the national economy and pushed it to the verge of default.
Mr Ismail told reporters that foreign debts and liabilities increased from 33pc to 40pc and debt servicing more than doubled from Rs1.5tr to Rs3.14tr.
In budget 2022-23, the government had fixed revenue collection targets at Rs7.47tr, he said, adding that non-revenue collection was targeted at Rs1.94tr, which not only would be achieved but also surpassed.
Despite the tough fiscal position, he said the government raised its budgetary allocation of the Benazir Income Supports Programme from Rs250bn to Rs364bn.
Replying to a question, the minister said interest-free loans would be provided to youth besides promoting the IT sector, adding that the government had also provided Rs109bn for the higher education commission and allocated Rs5bn for the scholarship of the students from Balochistan.
DAWN
ISLAMABAD: Pakistan is likely to get $4 billion from friendly countries this month to bridge a gap in foreign reserves highlighted by the International Monetary Fund, Finance Minister Miftah Ismail said, two days after sealing a deal with the lender.
The IMF reached a staff-level agreement with Pakistan on Thursday that would pave the way for a disbursement of $1.18bn. The board is also considering adding $1bn to a $6bn programme agreed in 2019.
“As per the IMF, there is a $4bn gap,” Mr Ismail told a news conference in Islamabad, referring to the shortfall in foreign reserves.
“We will, God willing, fill this gap in the month of July,” he said. “We think that we will get $1.2bn in deferred oil payment from a friendly country. We think that a foreign country will invest between $1.5bn to $2bn in stocks on a G2G (government-to-government) basis, and another friendly country will perhaps give us gas on deferred payment and yet another friendly country will make some deposits.”
Miftah expects $3.5bn from ADB, $2.5bn from World Bank and $400-500m from AIIB in current fiscal year
Depleting reserves, a widening current account deficit and the rupee’s depreciation against the dollar have left the nation facing a balance-of-payments crisis.
Without the IMF deal, which should open up other avenues for external finance, Mr Ismail said the country could have headed towards default.
He said the country would also get around $6bn from multilateral lenders this fiscal year, including $3.5bn from the Asian Development Bank and $2.5bn from the World Bank.
He said $400m to $500m was also expected from the Asian Infrastructure Investment Bank while the Islamic Development Bank was also likely to increase the funding.
‘Unpopular decisions’
The current government had to take tough and unpopular decisions to avert default, Mr Ismail said, blaming the previous administration for all the economic woes faced by the country.
He hoped the rupee would strengthen against the dollar soon after the IMF agreement was finalised, which was expected in the current month. Besides, he said the government was aiming to curb energy imports to $2.7bn this month from $3.7bn last month, which was also expected to take some pressure off the local currency.
However, he stressed that adhering to strict fiscal and financial discipline was vital to put the economy on a fast track, have sustainable economic development and attain social prosperity.
The press conference was heavily tilted towards criticising the “mismanagement and bad governance” of the previous PTI-led government, which Mr Ismail said was incapable and inefficient and pushed the country on the verge of economic default.
During the first three years of the PTI government, the budget deficit hit a historically high level of Rs3.41 trillion compared to Rs1.66tr during PML-N’s five-year tenure from 2013 to 2018.
Net debt and liabilities grew 78pc during the first three years of the PTI government to Rs53.54tr from Rs23.67tr, he said, adding that the country witnessed historic high deficits and a free fall of the rupee.
The tax-to-GDP ratio came down to 9pc according to new GDP, he said, adding that the PML-N government had left the ratio at 11pc.
He said that delay in decision-making, poor commitments with international lending institutions, particularly with the IMF, also proved disastrous for the national economy and pushed it to the verge of default.
Mr Ismail told reporters that foreign debts and liabilities increased from 33pc to 40pc and debt servicing more than doubled from Rs1.5tr to Rs3.14tr.
In budget 2022-23, the government had fixed revenue collection targets at Rs7.47tr, he said, adding that non-revenue collection was targeted at Rs1.94tr, which not only would be achieved but also surpassed.
Despite the tough fiscal position, he said the government raised its budgetary allocation of the Benazir Income Supports Programme from Rs250bn to Rs364bn.
Replying to a question, the minister said interest-free loans would be provided to youth besides promoting the IT sector, adding that the government had also provided Rs109bn for the higher education commission and allocated Rs5bn for the scholarship of the students from Balochistan.
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Moody’s Investors Service on Monday termed the staff level agreement (SLA) signed by Pakistan with the International Monetary Fund (IMF) for the revival of its programme as ‘credit positive’ and hoped it would ease pressure on declining foreign exchange reserves.
But the credit rating agency wondered whether the government could afford to keep raising petroleum taxes and electricity tariffs in the run-up to the 2023 general elections.
“The agreement is credit positive for Pakistan because it paves the way for the release of $1.2 billion in IMF financing at a time when its foreign exchange reserves are under significant pressure”, said Moody’s. This is likely to unlock additional funding from other multilateral and bilateral partners.
It, however, warned that Pakistan’s ability to complete the current programme and maintain a credible policy path that supports further financing remains highly uncertain, while elevated inflation and a higher cost of living are adding to social and political risks.
Warns of political challenges to complete bailout programme
The government may also find it difficult to continually enact revenue-raising reforms, such as steadily increasing petroleum levies and raising power tariffs, particularly in the run-up to the next general elections scheduled for mid-2023.
The Moody’s comments based on SLA reached on July 14 for completion of 7th and 8th reviews for disbursement of $1.2bn, subject to approval by the IMF Executive Board, did not take into account the election setback to the PMLN in the country’s largest Punjab province.
The agency also expected the country’s current account deficit had widened since mid-2021 on higher food and oil prices and stronger demand for imports combined with domestic political uncertainty, leading to a sharp devaluation of Pakistan’s currency and resultant further jump in import costs.
It estimated the current account deficit to narrow to 3.5-4pc of GDP in the fiscal year 2023 from 4.5-5pc in fiscal 2022 as imports moderate amid slowing growth and measures to curb nonessential imports. However, Pakistan’s financing needs would remain high amid continued high global commodity prices and the need to repay external debt, it said.
Moody’s expected “the IMF Executive Board to approve the $1.2bn disbursement in the third quarter of this year” and added that it also expected Pakistan to maintain its engagement with the IMF, which would catalyze financing from other external sources as it focuses on policy priorities that the IMF has identified, including implementing the fiscal 2023 budget, making progress on power sector reforms, lowering inflation, reducing poverty, enhancing governance and mitigating corruption.
The agency said it expected Pakistan to be able to meet its external financing needs for the next few years.
Published in Dawn, July 19th, 2022
But the credit rating agency wondered whether the government could afford to keep raising petroleum taxes and electricity tariffs in the run-up to the 2023 general elections.
“The agreement is credit positive for Pakistan because it paves the way for the release of $1.2 billion in IMF financing at a time when its foreign exchange reserves are under significant pressure”, said Moody’s. This is likely to unlock additional funding from other multilateral and bilateral partners.
It, however, warned that Pakistan’s ability to complete the current programme and maintain a credible policy path that supports further financing remains highly uncertain, while elevated inflation and a higher cost of living are adding to social and political risks.
Warns of political challenges to complete bailout programme
The government may also find it difficult to continually enact revenue-raising reforms, such as steadily increasing petroleum levies and raising power tariffs, particularly in the run-up to the next general elections scheduled for mid-2023.
The Moody’s comments based on SLA reached on July 14 for completion of 7th and 8th reviews for disbursement of $1.2bn, subject to approval by the IMF Executive Board, did not take into account the election setback to the PMLN in the country’s largest Punjab province.
The agency also expected the country’s current account deficit had widened since mid-2021 on higher food and oil prices and stronger demand for imports combined with domestic political uncertainty, leading to a sharp devaluation of Pakistan’s currency and resultant further jump in import costs.
It estimated the current account deficit to narrow to 3.5-4pc of GDP in the fiscal year 2023 from 4.5-5pc in fiscal 2022 as imports moderate amid slowing growth and measures to curb nonessential imports. However, Pakistan’s financing needs would remain high amid continued high global commodity prices and the need to repay external debt, it said.
Moody’s expected “the IMF Executive Board to approve the $1.2bn disbursement in the third quarter of this year” and added that it also expected Pakistan to maintain its engagement with the IMF, which would catalyze financing from other external sources as it focuses on policy priorities that the IMF has identified, including implementing the fiscal 2023 budget, making progress on power sector reforms, lowering inflation, reducing poverty, enhancing governance and mitigating corruption.
The agency said it expected Pakistan to be able to meet its external financing needs for the next few years.
Published in Dawn, July 19th, 2022
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ISLAMABAD (Dunya News) - The State Bank of Pakistan (SBP) on Wednesday said that the country’s situation is completely different from Sri Lanka and after the no-confidence motion against the former Prime Minister Imran Khan, the International Monetary Fund’s confidence in Pakistan has decreased but there is no option left other than IMF.
In this regard, SBP official said the State Bank is constantly monitoring the economic situation and also taking steps to stabilize the rupee, adding that Pakistan will never default because the country’s situation is completely different from Sri Lanka.
“Unnecessary imports have been reduced in Pakistan and the government has made all the difficult decisions now there are no difficult situations, the current financial year 2022-23 is a difficult year for the country’s economy,” officials added.
SBP added that after the no-confidence motion against Imran Khan, the confidence of IMF in Pakistan dropped, but we had no option left other than IMF.
Officials added that In case of political instability, the IMF has no problem negotiating with the careta
In this regard, SBP official said the State Bank is constantly monitoring the economic situation and also taking steps to stabilize the rupee, adding that Pakistan will never default because the country’s situation is completely different from Sri Lanka.
“Unnecessary imports have been reduced in Pakistan and the government has made all the difficult decisions now there are no difficult situations, the current financial year 2022-23 is a difficult year for the country’s economy,” officials added.
SBP added that after the no-confidence motion against Imran Khan, the confidence of IMF in Pakistan dropped, but we had no option left other than IMF.
Officials added that In case of political instability, the IMF has no problem negotiating with the careta
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Federal Minister for Planning and Development Ahsan Iqbal said on Wednesday that the International Monetary Fund (IMF) has not added new conditions to the staff-level agreement it concluded with Pakistan last week.
Bloomberg reported earlier on Wednesday that the Fund was “assessing Saudi Arabia’s commitment to financing Pakistan before it disburses fresh funds to the South Asian nation.”
The minister, who has held two meetings with IMF officials in New York and Washington this week, said the fund “did not raise this issue in talks with us.”
Asked at a news briefing at the Pakistan Embassy in Islamabad, Mr Iqbal said, “The Fund did not suggest any new conditions in our meetings.”
The minister said that the IMF has agreed to “release the funds by August and extend the facility to June 2023 and add one billion dollars to the package.”
However, Bloomberg reported that the Washington-based lender “wants to ensure that Saudi Arabia will follow through with as much as $4bn in funding to Pakistan to ensure Islamabad does not have a funding gap after the IMF loan.”
The IMF and Pakistan reached a staff-level agreement last week to complete the combined seventh and eighth reviews of the country’s Extended Fund Facility (EFF). The IMF’s Executive Board still has to approve the agreement before Pakistan receives the next tranche of $1.2bn, bringing total disbursements under the programme to about $4.2bn. The board is expected to meet in August.
The Bloomberg report also said that the $1.2bn from the IMF would be insufficient for Pakistan to avoid a debt default. The report pointed out that “Pakistan’s rupee and bonds are sinking as the financing woes, coupled with renewed political uncertainty, roil the country.”
Pakistan needs at least $41bn in the next 12 months to fund debt repayments and boost foreign exchange reserves, the report added.
The planning minister said that in his meeting with IMF officials at the UN he suggested setting up a Covid-like facility for developing countries to help them deal with the impact of the Ukraine war.
“This war is a super-shock for developing economies,” he said. “It has upset their balance of payments, created a food shortage and a major energy crisis for them. This impact is stronger than that of the pandemic.”
Mr Iqbal said that the international community, particularly developed countries, “must devise a mechanism to provide fiscal relief for developing countries so that they can revive their development funds and social support budgets.”
The minister said that in his meeting with IMF officials in Washington he reiterated Pakistan’s commitment to the IMF programme, which was violated by the PTI government. “This violation has shaken the confidence of lenders like the IMF,” he said. “We assured them that there would be no more breaches of confidence. We told them that Pakistan means business,” the minister said.
“We urged them to tell their board, when it meets to consider the staff level agreement, that we want to do all we need to revivify our economy.”
Published in Dawn, July 21st, 2022
Bloomberg reported earlier on Wednesday that the Fund was “assessing Saudi Arabia’s commitment to financing Pakistan before it disburses fresh funds to the South Asian nation.”
The minister, who has held two meetings with IMF officials in New York and Washington this week, said the fund “did not raise this issue in talks with us.”
Asked at a news briefing at the Pakistan Embassy in Islamabad, Mr Iqbal said, “The Fund did not suggest any new conditions in our meetings.”
The minister said that the IMF has agreed to “release the funds by August and extend the facility to June 2023 and add one billion dollars to the package.”
However, Bloomberg reported that the Washington-based lender “wants to ensure that Saudi Arabia will follow through with as much as $4bn in funding to Pakistan to ensure Islamabad does not have a funding gap after the IMF loan.”
The IMF and Pakistan reached a staff-level agreement last week to complete the combined seventh and eighth reviews of the country’s Extended Fund Facility (EFF). The IMF’s Executive Board still has to approve the agreement before Pakistan receives the next tranche of $1.2bn, bringing total disbursements under the programme to about $4.2bn. The board is expected to meet in August.
The Bloomberg report also said that the $1.2bn from the IMF would be insufficient for Pakistan to avoid a debt default. The report pointed out that “Pakistan’s rupee and bonds are sinking as the financing woes, coupled with renewed political uncertainty, roil the country.”
Pakistan needs at least $41bn in the next 12 months to fund debt repayments and boost foreign exchange reserves, the report added.
The planning minister said that in his meeting with IMF officials at the UN he suggested setting up a Covid-like facility for developing countries to help them deal with the impact of the Ukraine war.
“This war is a super-shock for developing economies,” he said. “It has upset their balance of payments, created a food shortage and a major energy crisis for them. This impact is stronger than that of the pandemic.”
Mr Iqbal said that the international community, particularly developed countries, “must devise a mechanism to provide fiscal relief for developing countries so that they can revive their development funds and social support budgets.”
The minister said that in his meeting with IMF officials in Washington he reiterated Pakistan’s commitment to the IMF programme, which was violated by the PTI government. “This violation has shaken the confidence of lenders like the IMF,” he said. “We assured them that there would be no more breaches of confidence. We told them that Pakistan means business,” the minister said.
“We urged them to tell their board, when it meets to consider the staff level agreement, that we want to do all we need to revivify our economy.”
Published in Dawn, July 21st, 2022
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Pakistan obtains foreign loans of $22.5bn in FY22
Saudi Arabia becomes largest lender in the last fiscal year and provided over $400 million in FY2022
ISLAMABAD: Pakistan has secured total foreign loans of $22.5 billion in the last financial year 2021-22 out of which it obtained highly expensive $2.24 billion commercial loans just last month (June 2022) to avoid depletion of foreign currency reserves at an accelerated pace.
Owing to the inability of the government to revive the IMF program, Islamabad could not generate budgetary/policy loans from the multilateral creditors and had to rely upon disbursements of loans for project financing. In such a scenario, the government had to rely upon commercial loans, bilateral deposits, issuance of international bonds and guaranteed loans in order to fill the financing gap.
However, the external debt repayments and increased imports bill resulted in depleting of foreign currency reserves and the foreign exchange reserves declined from $20 billion to below $10 billion till June 30, 2022. Till July 15, 2022, the foreign exchange reserves had further declined to $9.3 billion.
In bilateral lenders, Saudi Arabia has become the largest lender in the last fiscal year and provided over $400 million in FY2022.
The Economic Affairs Division (EAD) data showed the government received total loans and grants of $17 billion ($16.98 billion exactly) in the last fiscal year 2021-22 ended on June 30, 2022 against $14.2 billion received in the previous fiscal year 2020-21.
However, according to the State Bank of Pakistan (SBP) data, they received $4.606 billion in Roshan Digital Accounts out of which $2.9 billion were received for Naya Pakistan Certificate till June 22, 2022. Pakistan also received $1 billion tranche from the IMF after completion of the 6th Review under the $6 billion Extended Fund Facility (EFF) in February 2022.
According to the official data released by EAD, Islamabad received $4.8 billion from multilateral creditors during the last fiscal year out of which the Asian Development Bank (ADB) disbursed a loan of $1.62 billion. The Asian Infrastructure Investment Bank (AIIB) disbursed $41.6 million, ECOT/Bank $52.3 million, European Union (EU) $22.55 million, World Bank’s IBRD $259.6 million, WB’s IDA $1.32 billion, Islamic Development Bank (IDB) $78 million, Islamic Development Bank (short-term) $1.327 billion, IFAD $43.13 million, Japan $0.55 million, MDTF $6.1 million and OFID $50 million.
The bilateral donors provided $708 million to Pakistan in the last fiscal year as China disbursed $162.6 million, France $15.5 million, Germany $16.68 million, Japan $20 million, Korea $5.51 million, Kuwait $0.11 million, Oman $0.75 million, Saudi Arabia $401.09 million, UK $16.01 million and USA $69.82 million.
The multilateral and bilateral creditors had provided $5.536 billion during the last financial year 2021-22.
The government generated $2.04 billion through international bonds in the last fiscal year. The last PTI led regime had launched both Eurobond and Sukuk bond for raising dollar inflows.
Through commercial loans, the government raised $4.863 billion in the last fiscal year out of which $2.24 billion were generated alone in June 2022. It seemed that Islamabad was left with no other options but to generate dollar inflows through this easy mode of raising dollars at a time when the foreign exchange reserves were declining at a rapid pace.
The government received time deposits of $3 billion in the current fiscal year from Saudi Arabia. The government also generated $1.532 billion in the shape of guaranteed loans in the last financial year.
The News PK
Saudi Arabia becomes largest lender in the last fiscal year and provided over $400 million in FY2022
ISLAMABAD: Pakistan has secured total foreign loans of $22.5 billion in the last financial year 2021-22 out of which it obtained highly expensive $2.24 billion commercial loans just last month (June 2022) to avoid depletion of foreign currency reserves at an accelerated pace.
Owing to the inability of the government to revive the IMF program, Islamabad could not generate budgetary/policy loans from the multilateral creditors and had to rely upon disbursements of loans for project financing. In such a scenario, the government had to rely upon commercial loans, bilateral deposits, issuance of international bonds and guaranteed loans in order to fill the financing gap.
However, the external debt repayments and increased imports bill resulted in depleting of foreign currency reserves and the foreign exchange reserves declined from $20 billion to below $10 billion till June 30, 2022. Till July 15, 2022, the foreign exchange reserves had further declined to $9.3 billion.
In bilateral lenders, Saudi Arabia has become the largest lender in the last fiscal year and provided over $400 million in FY2022.
The Economic Affairs Division (EAD) data showed the government received total loans and grants of $17 billion ($16.98 billion exactly) in the last fiscal year 2021-22 ended on June 30, 2022 against $14.2 billion received in the previous fiscal year 2020-21.
However, according to the State Bank of Pakistan (SBP) data, they received $4.606 billion in Roshan Digital Accounts out of which $2.9 billion were received for Naya Pakistan Certificate till June 22, 2022. Pakistan also received $1 billion tranche from the IMF after completion of the 6th Review under the $6 billion Extended Fund Facility (EFF) in February 2022.
According to the official data released by EAD, Islamabad received $4.8 billion from multilateral creditors during the last fiscal year out of which the Asian Development Bank (ADB) disbursed a loan of $1.62 billion. The Asian Infrastructure Investment Bank (AIIB) disbursed $41.6 million, ECOT/Bank $52.3 million, European Union (EU) $22.55 million, World Bank’s IBRD $259.6 million, WB’s IDA $1.32 billion, Islamic Development Bank (IDB) $78 million, Islamic Development Bank (short-term) $1.327 billion, IFAD $43.13 million, Japan $0.55 million, MDTF $6.1 million and OFID $50 million.
The bilateral donors provided $708 million to Pakistan in the last fiscal year as China disbursed $162.6 million, France $15.5 million, Germany $16.68 million, Japan $20 million, Korea $5.51 million, Kuwait $0.11 million, Oman $0.75 million, Saudi Arabia $401.09 million, UK $16.01 million and USA $69.82 million.
The multilateral and bilateral creditors had provided $5.536 billion during the last financial year 2021-22.
The government generated $2.04 billion through international bonds in the last fiscal year. The last PTI led regime had launched both Eurobond and Sukuk bond for raising dollar inflows.
Through commercial loans, the government raised $4.863 billion in the last fiscal year out of which $2.24 billion were generated alone in June 2022. It seemed that Islamabad was left with no other options but to generate dollar inflows through this easy mode of raising dollars at a time when the foreign exchange reserves were declining at a rapid pace.
The government received time deposits of $3 billion in the current fiscal year from Saudi Arabia. The government also generated $1.532 billion in the shape of guaranteed loans in the last financial year.
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The International Monetary Fund (IMF) on Tuesday conditioned the approval of the $1.2 billion loan tranche in late August with Pakistan’s ability to timely secure ‘adequate assurances’ from friendly countries for more loans to bridge financing gap, exposing Islamabad to demands by its bilateral creditors.
In a terse statement, Resident Representative of the IMF, Esther Perez, said that “with the increase in PDL (Petroleum Development Levy) on July 31, the last prior action for the combined 7th and 8th review has been met”.
The merger will pave the way for the release of nearly $1.2 billion tranche, as against the original schedule of the $2 billion.
But Esther remained short of giving a confirmed board meeting date due to what the IMF sees a gap against Pakistan’s gross external financing requirements.
“The board meeting is tentatively planned for late August once adequate financing assurances are confirmed,” Esther Perez said.
The IMF gave the unexpected statement two days after the Ministry of Finance and the State Bank of Pakistan had claimed that they had met the financing requirements for the current fiscal year.
Chief of the Army Staff General Qamar Javed Bajwa had also appealed to the US to help Islamabad secure an early dispersal of $1.2 billion. The Foreign Office on Friday confirmed that there have been contacts between General Qamar Javed Bajwa and US Deputy Secretary of State Wendy Sherman.
It seems that the contacts have also not helped Pakistan to secure an early confirmed board meeting date. Islamabad will have to convince the three main bilateral creditors to directly assure the IMF that they are willing to chip in $4 billion financing.
Although the IMF did not publicly disclose the quantum of the financing gap, Finance Minister Miftah Ismail had said last month that the gap was $4 billion against the estimated financing requirements of over $35 billion.
However, Miftah Ismail said on Tuesday that “there is no financing gap and the $4 billion will actually end up in increasing the foreign exchange reserves by over $6 billion in this fiscal year”.
The minister had also given a plan for arranging these funds from Saudi Arabia, the United Arab Emirates and Qatar in shape of oil and gas on deferred payments, selling state assets and shares of the listed companies and borrowing against the quota of Saudi Arabia.
So far no meaningful progress has been made, which has held back the IMF from officially announcing the August 24th board meeting date.
Hamad Obaid Ibrahim Salim Al-Zaabi, Ambassador of the UAE, called on Miftah Ismail on Tuesday.
“The finance minister apprised the UAE’s ambassador about the potential investment areas where the UAE can invest and also assured the ambassador of UAE of greater facilitation and support,” according to a statement released by the Ministry of Finance.
The ambassador of UAE also showed keen interest in enhancing and strengthening the bilateral relation between both countries especially on economic fronts, it added.
Pakistan is trying to arrange $2 billion to $2.5 billion from the UAE through emergency sale of two LNG-fired power plants and offloading stakes in its blue-chip companies.
On Sunday, the Ministry of Finance and the SBP in a joint statement said that this fiscal year’s financing needs stem from a current account deficit of around $10 billion and principal repayments on external debt of around $24 billion. In order to bolster Pakistan’s foreign exchange reserves position, it is important for Pakistan to be slightly overfinanced relative to these needs, it added.
“As a result, an extra cushion of $4 billion is planned over the next 12 months. This funding commitment is being arranged through a number of different channels, including from friendly countries that helped Pakistan in a similar way at the beginning of the IMF program in June 2019” , according to the joint statement.
The dwindling economy has caused the rupee to shed its value by 30% or Rs54 per dollar since Shehbaz Sharif came in power in April, also exposing the inexperience of the Sharif administration.
Last week, the Finance Minister said that the IMF had set the prior conditions of approval of the new budget, a memorandum of understanding with the provinces to create cash surpluses, raising petroleum levy rates, increasing electricity prices in July, August and October and increasing interest rates. He said that these conditions have been met.
Both the Ministry of Finance and the SBP had hoped that since all prior actions for completing the review have been met and “the formal Board meeting to disburse the next tranche of $1.2 billion is expected in a couple of weeks”.
The IMF statement denies this impression of securing the board meeting in two weeks.
Despite a delay in revival of the programme, the federal government now hopes that the pressure on the rupee value has been eased after nearly 38% reduction in the import bill in July over the preceding month. It added the foreign exchange payments in July were significantly lower than in June. The payments were a sustainable $6.1 billion in July compared to $7.9 billion in June, it added.
In a terse statement, Resident Representative of the IMF, Esther Perez, said that “with the increase in PDL (Petroleum Development Levy) on July 31, the last prior action for the combined 7th and 8th review has been met”.
The merger will pave the way for the release of nearly $1.2 billion tranche, as against the original schedule of the $2 billion.
But Esther remained short of giving a confirmed board meeting date due to what the IMF sees a gap against Pakistan’s gross external financing requirements.
“The board meeting is tentatively planned for late August once adequate financing assurances are confirmed,” Esther Perez said.
The IMF gave the unexpected statement two days after the Ministry of Finance and the State Bank of Pakistan had claimed that they had met the financing requirements for the current fiscal year.
Chief of the Army Staff General Qamar Javed Bajwa had also appealed to the US to help Islamabad secure an early dispersal of $1.2 billion. The Foreign Office on Friday confirmed that there have been contacts between General Qamar Javed Bajwa and US Deputy Secretary of State Wendy Sherman.
It seems that the contacts have also not helped Pakistan to secure an early confirmed board meeting date. Islamabad will have to convince the three main bilateral creditors to directly assure the IMF that they are willing to chip in $4 billion financing.
Although the IMF did not publicly disclose the quantum of the financing gap, Finance Minister Miftah Ismail had said last month that the gap was $4 billion against the estimated financing requirements of over $35 billion.
However, Miftah Ismail said on Tuesday that “there is no financing gap and the $4 billion will actually end up in increasing the foreign exchange reserves by over $6 billion in this fiscal year”.
The minister had also given a plan for arranging these funds from Saudi Arabia, the United Arab Emirates and Qatar in shape of oil and gas on deferred payments, selling state assets and shares of the listed companies and borrowing against the quota of Saudi Arabia.
So far no meaningful progress has been made, which has held back the IMF from officially announcing the August 24th board meeting date.
Hamad Obaid Ibrahim Salim Al-Zaabi, Ambassador of the UAE, called on Miftah Ismail on Tuesday.
“The finance minister apprised the UAE’s ambassador about the potential investment areas where the UAE can invest and also assured the ambassador of UAE of greater facilitation and support,” according to a statement released by the Ministry of Finance.
The ambassador of UAE also showed keen interest in enhancing and strengthening the bilateral relation between both countries especially on economic fronts, it added.
Pakistan is trying to arrange $2 billion to $2.5 billion from the UAE through emergency sale of two LNG-fired power plants and offloading stakes in its blue-chip companies.
On Sunday, the Ministry of Finance and the SBP in a joint statement said that this fiscal year’s financing needs stem from a current account deficit of around $10 billion and principal repayments on external debt of around $24 billion. In order to bolster Pakistan’s foreign exchange reserves position, it is important for Pakistan to be slightly overfinanced relative to these needs, it added.
“As a result, an extra cushion of $4 billion is planned over the next 12 months. This funding commitment is being arranged through a number of different channels, including from friendly countries that helped Pakistan in a similar way at the beginning of the IMF program in June 2019” , according to the joint statement.
The dwindling economy has caused the rupee to shed its value by 30% or Rs54 per dollar since Shehbaz Sharif came in power in April, also exposing the inexperience of the Sharif administration.
Last week, the Finance Minister said that the IMF had set the prior conditions of approval of the new budget, a memorandum of understanding with the provinces to create cash surpluses, raising petroleum levy rates, increasing electricity prices in July, August and October and increasing interest rates. He said that these conditions have been met.
Both the Ministry of Finance and the SBP had hoped that since all prior actions for completing the review have been met and “the formal Board meeting to disburse the next tranche of $1.2 billion is expected in a couple of weeks”.
The IMF statement denies this impression of securing the board meeting in two weeks.
Despite a delay in revival of the programme, the federal government now hopes that the pressure on the rupee value has been eased after nearly 38% reduction in the import bill in July over the preceding month. It added the foreign exchange payments in July were significantly lower than in June. The payments were a sustainable $6.1 billion in July compared to $7.9 billion in June, it added.
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Pakistan is set to get assurances of $4 billion additional financing from friendly countries this week that will pave the way for the revival of the International Monetary Fund (IMF) programme, State Bank of Pakistan (SBP) Acting Governor Dr Murtaza Syed said on Wednesday.
Saudi Arabia is the first country that has agreed to give commitment to the IMF, a top government source confirmed.
“The discussions are taking place on various options to secure assurances for $4 billion financing and we hope that it will be done this week”, said the acting governor in an exclusive interview with The Express Tribune. Pakistan was also in discussions with China for additional financing, he added.
At least one country has given assurance to the IMF on Wednesday, Finance Minister Miftah Ismail confirmed to The Express Tribune without disclosing the name.
Similarly, another senior government functionary said that Saudi Arabia has committed to providing funds.
The statement from the governor and the finance minister came on the heels of the IMF’s pronouncement that the global lender will call the board meeting to approve Pakistan’s request for the revival of the programme once it has secured assurances for the $4 billion financing.
The assurances are now expected to end uncertainty in the markets and put the government and the central bank on solid footing to manage the current crisis.
The executive directors (of the friendly countries) now just need to pick up the phone and inform Pakistan’s Mission Chief that they are ready to give a certain amount for 12 months, said Dr Syed.
Once Pakistan is able to show the available financing, the IMF would convene the board meeting in two weeks, said the acting governor. He added Pakistan and the IMF have agreed on the Letter of Intent and it would be signed once the financing assurances are formalized.
The board meeting will approve a $1.2 billion loan tranche in addition to extending the programme tenure to June next year and increasing the total size to $7 billion.
The UAE was more interested in potentially acquiring some assets, and Saudi Arabia is ready to give loans as well as oil on deferred payments.
Pakistan is exploring various options to seek Chinese financial assistance that include cash deposits, commercial loans and increasing the bilateral currency swap limit. Any of these options can be upsized, said the acting governor.
“We are continually in discussions with China as our view is that the currency swaps should also be used for bilateral trade. China has understood the logic that it is important for increasing bilateral trade”.
The acting governor said arranging $4 billion financing is the responsibility of both Pakistan and the IMF but the onus is more on us because we need the money. The IMF is also helping Pakistan in getting these assurances.
Dr Syed said that against the estimated $34 billion external financing requirements, Pakistan has already lined up $36 billion and the additional $4 billion demand is for increasing the foreign exchange reserve.
The IMF says Pakistan’s foreign exchange reserves position is “uncomfortable” and it wants Pakistan to create some extra cushion, he added.
Read More Pressure on rupee to ease after IMF deal
To a question, he said that there have been talks with Saudi Arabia about borrowing its special drawing rights but the IMF has not yet developed a mechanism for that. It is expected that the IMF will finalize the framework for the structure of such a transaction before the end of this year and if Pakistan can borrow the Saudi SDRs under the IMF mechanism, it should do that, said the acting governor.
The delay in the IMF programme has cost Pakistan a lot of foreign exchange reserves. The reserves, which were $17 billion in February, have been depleted by half due to external debt repayments.
Dr Syed said that the political uncertainty has also reduced after the government has given a statement that it will complete its term in office.
The combination of political uncertainty and the high current account deficit seems to be getting under control which has also helped strengthen the rupee on Wednesday, said the acting governor. He said the exporters also offloaded their dollars in the market, which led to better inflows and as a result the rupee recovered by a record Rs10 to a dollar in a single day and closed at Rs229.
The overshooting of the rupee against the US dollar has started correcting and it will recover in the next few months, the governor hoped.
He said that the current account deficit will improve because of the tightening of the monetary policy while the fiscal policy will be further tightened under the IMF programme.
Dr Syed said that about half of the reduction in the value of the Pak rupee since December was because of the strengthening of the US dollar against other currencies. The remaining half was because of the high current account deficit and the sentiments about the IMF programme and the political uncertainty.
During the past one and half months, the exporters were also delaying their export proceeds while the importers rushed to import goods due to negative sentiments.
The acting governor said that the structure of Pakistan’s economy is based on consumption and imports. The investment and savings are low, which leads to a higher current account deficit whenever the country grows at a higher rate.
In the short term, Pakistan does not have an option but to rely on foreign loans to meet our financing requirements, he added.
The acting governor said that once the situation improves, the restrictions imposed on imports would be lifted in three months.
Express Tribune
Saudi Arabia is the first country that has agreed to give commitment to the IMF, a top government source confirmed.
“The discussions are taking place on various options to secure assurances for $4 billion financing and we hope that it will be done this week”, said the acting governor in an exclusive interview with The Express Tribune. Pakistan was also in discussions with China for additional financing, he added.
At least one country has given assurance to the IMF on Wednesday, Finance Minister Miftah Ismail confirmed to The Express Tribune without disclosing the name.
Similarly, another senior government functionary said that Saudi Arabia has committed to providing funds.
The statement from the governor and the finance minister came on the heels of the IMF’s pronouncement that the global lender will call the board meeting to approve Pakistan’s request for the revival of the programme once it has secured assurances for the $4 billion financing.
The assurances are now expected to end uncertainty in the markets and put the government and the central bank on solid footing to manage the current crisis.
The executive directors (of the friendly countries) now just need to pick up the phone and inform Pakistan’s Mission Chief that they are ready to give a certain amount for 12 months, said Dr Syed.
Once Pakistan is able to show the available financing, the IMF would convene the board meeting in two weeks, said the acting governor. He added Pakistan and the IMF have agreed on the Letter of Intent and it would be signed once the financing assurances are formalized.
The board meeting will approve a $1.2 billion loan tranche in addition to extending the programme tenure to June next year and increasing the total size to $7 billion.
The UAE was more interested in potentially acquiring some assets, and Saudi Arabia is ready to give loans as well as oil on deferred payments.
Pakistan is exploring various options to seek Chinese financial assistance that include cash deposits, commercial loans and increasing the bilateral currency swap limit. Any of these options can be upsized, said the acting governor.
“We are continually in discussions with China as our view is that the currency swaps should also be used for bilateral trade. China has understood the logic that it is important for increasing bilateral trade”.
The acting governor said arranging $4 billion financing is the responsibility of both Pakistan and the IMF but the onus is more on us because we need the money. The IMF is also helping Pakistan in getting these assurances.
Dr Syed said that against the estimated $34 billion external financing requirements, Pakistan has already lined up $36 billion and the additional $4 billion demand is for increasing the foreign exchange reserve.
The IMF says Pakistan’s foreign exchange reserves position is “uncomfortable” and it wants Pakistan to create some extra cushion, he added.
Read More Pressure on rupee to ease after IMF deal
To a question, he said that there have been talks with Saudi Arabia about borrowing its special drawing rights but the IMF has not yet developed a mechanism for that. It is expected that the IMF will finalize the framework for the structure of such a transaction before the end of this year and if Pakistan can borrow the Saudi SDRs under the IMF mechanism, it should do that, said the acting governor.
The delay in the IMF programme has cost Pakistan a lot of foreign exchange reserves. The reserves, which were $17 billion in February, have been depleted by half due to external debt repayments.
Dr Syed said that the political uncertainty has also reduced after the government has given a statement that it will complete its term in office.
The combination of political uncertainty and the high current account deficit seems to be getting under control which has also helped strengthen the rupee on Wednesday, said the acting governor. He said the exporters also offloaded their dollars in the market, which led to better inflows and as a result the rupee recovered by a record Rs10 to a dollar in a single day and closed at Rs229.
The overshooting of the rupee against the US dollar has started correcting and it will recover in the next few months, the governor hoped.
He said that the current account deficit will improve because of the tightening of the monetary policy while the fiscal policy will be further tightened under the IMF programme.
Dr Syed said that about half of the reduction in the value of the Pak rupee since December was because of the strengthening of the US dollar against other currencies. The remaining half was because of the high current account deficit and the sentiments about the IMF programme and the political uncertainty.
During the past one and half months, the exporters were also delaying their export proceeds while the importers rushed to import goods due to negative sentiments.
The acting governor said that the structure of Pakistan’s economy is based on consumption and imports. The investment and savings are low, which leads to a higher current account deficit whenever the country grows at a higher rate.
In the short term, Pakistan does not have an option but to rely on foreign loans to meet our financing requirements, he added.
The acting governor said that once the situation improves, the restrictions imposed on imports would be lifted in three months.
Express Tribune
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IMF money may arrive in Pakistan’s account by August-end
ISLAMABAD: The Inter*nat*ional Monetary Fund (IMF) has convened a meeting of its executive board on August 29 to approve a bailout package for Pakistan, including disbursement of about $1.18bn, before the close of current month.
The move follows the completion of the $4 billion in bilateral financing from four friendly nations and would pave the way for an immediate disbursement, expected to be in Pakistan’s account before the end of working hours on August 31.
Finance Minister Miftah Ismail told Dawn that a letter of intent (LOI) had been received early Friday from the lender for the revival of the programme under the staff level agreement (SLA) and memorandum of economic and fiscal policies (MEFP) signed last month.
“We are going through the LOI, would sign and send [it] back to the IMF anytime soon and look forward to (executive) board meeting later this month for approval,” he said.
Miftah says letter of intent for programme’s revival to be signed, returned to lender in coming days
Sources said the executive board would meet on August 29 to take up Pakistan’s case for approval of the completion of seventh and eighth reviews of the Extended Fund Facility (EFF), besides a $1bn increase in size of the programme to $7bn and the extension of its tenure to August 2023.
Sources said the board meeting was convened after Saudi Arabia, the United Arab Emirates, Qatar and China confirmed to the IMF that they had completed arrangements for $4bn in bilateral financing to Pakistan, which was the last hitch to the bailout package after completion of all the prior actions agreed under the SLA. The IMF board’s clearance was expected to reverse continuously depleting foreign exchange reser*ves, strengthen Pakistani rupee and support balance of payments.
With increase in petroleum development levy on oil products on July 31, the IMF had publically confirmed that Pakistan had completed all the prior actions for revival of its programme but had linked the approval of disbursement of $1.18bn funds by its executive board to confirmation of $4bn additional inflows from the four friendly countries.
Since then, the rupee had been recovering against the dollar, from about Rs240 per dollar to less than Rs216 at present, and stock market had been showing robust activity following months of downturn. The exchange rate had been under continuous pressure amid declining foreign exchange reserves, mainly due to delay in formal commitment by the friendly countries.
The finance minister had earlier claimed to have lined up $8.5bn-$10bn inflows from the friendly countries against a financing gap of $4bn estimated by the IMF, but at the same time blamed political turmoil in the country for steep currency depreciation and bullish stock market.
The IMF had announced on July 13 a much-awaited staff-level agreement with Pakistan on nine-month extension in tenor and $1bn increase in size of the bailout package to $7bn, including upfront disbursement of about $1.18bn.
Its approval from the IMF executive board was, however, linked to a series of prior actions that the government fulfilled over the past two weeks
‘Additional measures’
On top of this, the IMF also made it binding on the authorities to “stand ready to take any additional measures necessary to meet programme objectives, given the elevated uncertainty in the global economy and financial markets”. Since then, the government waived taxes on small traders and decided to impose over Rs40bn worthy of additional taxes to make up for an unseen supplementary grant required to bailout the state-run Pakistan State Oil whose more than Rs610bn is stuck up with the government, its entities or private companies choked by non-payments by the public sector.
Likewise, the government also gave a commitment to ensure timely implementation of power tariff rebasing as already determined by the power regulator along with quarterly and monthly adjustments to rein in rising circular debt which the Fund estimated to have increased by Rs850bn last year ending June 30. The government has now notified a schedule for gradual power tariff increase.
The government has since also revised the development levy on petroleum products and fixed at the rate of Rs20 on petrol and Rs10 per litre on high speed diesel, light diesel and kerosene – the last prior action under the commitment.
The original $6bn worth of 39-month Extended Fund Facility (EFF) — provided to countries facing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position — was to end in September this year, but only three tranches of about $3bn could so far be disbursed as the programme suffered repeated breakdowns.
DAWN
ISLAMABAD: The Inter*nat*ional Monetary Fund (IMF) has convened a meeting of its executive board on August 29 to approve a bailout package for Pakistan, including disbursement of about $1.18bn, before the close of current month.
The move follows the completion of the $4 billion in bilateral financing from four friendly nations and would pave the way for an immediate disbursement, expected to be in Pakistan’s account before the end of working hours on August 31.
Finance Minister Miftah Ismail told Dawn that a letter of intent (LOI) had been received early Friday from the lender for the revival of the programme under the staff level agreement (SLA) and memorandum of economic and fiscal policies (MEFP) signed last month.
“We are going through the LOI, would sign and send [it] back to the IMF anytime soon and look forward to (executive) board meeting later this month for approval,” he said.
Miftah says letter of intent for programme’s revival to be signed, returned to lender in coming days
Sources said the executive board would meet on August 29 to take up Pakistan’s case for approval of the completion of seventh and eighth reviews of the Extended Fund Facility (EFF), besides a $1bn increase in size of the programme to $7bn and the extension of its tenure to August 2023.
Sources said the board meeting was convened after Saudi Arabia, the United Arab Emirates, Qatar and China confirmed to the IMF that they had completed arrangements for $4bn in bilateral financing to Pakistan, which was the last hitch to the bailout package after completion of all the prior actions agreed under the SLA. The IMF board’s clearance was expected to reverse continuously depleting foreign exchange reser*ves, strengthen Pakistani rupee and support balance of payments.
With increase in petroleum development levy on oil products on July 31, the IMF had publically confirmed that Pakistan had completed all the prior actions for revival of its programme but had linked the approval of disbursement of $1.18bn funds by its executive board to confirmation of $4bn additional inflows from the four friendly countries.
Since then, the rupee had been recovering against the dollar, from about Rs240 per dollar to less than Rs216 at present, and stock market had been showing robust activity following months of downturn. The exchange rate had been under continuous pressure amid declining foreign exchange reserves, mainly due to delay in formal commitment by the friendly countries.
The finance minister had earlier claimed to have lined up $8.5bn-$10bn inflows from the friendly countries against a financing gap of $4bn estimated by the IMF, but at the same time blamed political turmoil in the country for steep currency depreciation and bullish stock market.
The IMF had announced on July 13 a much-awaited staff-level agreement with Pakistan on nine-month extension in tenor and $1bn increase in size of the bailout package to $7bn, including upfront disbursement of about $1.18bn.
Its approval from the IMF executive board was, however, linked to a series of prior actions that the government fulfilled over the past two weeks
‘Additional measures’
On top of this, the IMF also made it binding on the authorities to “stand ready to take any additional measures necessary to meet programme objectives, given the elevated uncertainty in the global economy and financial markets”. Since then, the government waived taxes on small traders and decided to impose over Rs40bn worthy of additional taxes to make up for an unseen supplementary grant required to bailout the state-run Pakistan State Oil whose more than Rs610bn is stuck up with the government, its entities or private companies choked by non-payments by the public sector.
Likewise, the government also gave a commitment to ensure timely implementation of power tariff rebasing as already determined by the power regulator along with quarterly and monthly adjustments to rein in rising circular debt which the Fund estimated to have increased by Rs850bn last year ending June 30. The government has now notified a schedule for gradual power tariff increase.
The government has since also revised the development levy on petroleum products and fixed at the rate of Rs20 on petrol and Rs10 per litre on high speed diesel, light diesel and kerosene – the last prior action under the commitment.
The original $6bn worth of 39-month Extended Fund Facility (EFF) — provided to countries facing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position — was to end in September this year, but only three tranches of about $3bn could so far be disbursed as the programme suffered repeated breakdowns.
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Another IMF condition fulfilled: S Arabia to renew $3bn deposit for Pakistan this week
Saudi Arabia plans to renew its $3 billion deposit in assistance to Pakistan which looks to rein in one of Asia’s highest inflation rates and stave off a current-account crisis
RIYADH: Saudi Arabia plans to renew its $3 billion deposit in assistance to Pakistan, as the South Asian nation looks to rein in one of Asia’s highest inflation rates and stave off a current-account crisis, according to people familiar with the matter.
The Saudi Finance Ministry plans to renew its $3 billion deposit with State Bank of Pakistan as soon as this week, the sources said, asking not to be identified discussing private deliberations, Bloomberg reported on Saturday.
The kingdom also plans to provide $100 million a month for 10 months in petroleum products that will be granted as additional support, the sources added.
Pakistan’s funding gap has been covered after the kingdom’s commitment, the sources said, adding that the assurance will pave the way for the International Monetary Fund’s loan approval at the end of the month. Saudi Arabia has been coordinating with the IMF to ensure that Pakistan is fully supported, one of the sources said. The commitment can be announced within the next two days, said one of the sources. Representatives for Saudi Arabia and Pakistan’s Finance Ministry didn’t immediately respond to messages seeking comment.
The aid comes as the IMF has been looking to assess Saudi Arabia’s commitment to financing Pakistan before the multilateral lender disburses fresh funds to the South Asian nation. Bloomberg reported in July that the IMF wanted to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad does not have a funding gap after the IMF loan.
Saudi Arabia extended support multiple times to Pakistan. It pledged $4.2 billion in assistance to Pakistan when the former prime minister, Imran Khan, visited the kingdom. That included a deposit of $3 billion with the State Bank of Pakistan to help shore up its reserves and a facility to finance oil derivatives trade worth $1.2 billion during the year.
Saudi Arabia discussed extending the term of its $3 billion deposit with Pakistan when Prime Minister Shehbaz Sharif met the kingdom’s Crown Prince Mohammed bin Salman in May.
Mehtab Haider adds from Islamabad: On the eve of 75 years of economic journey of Pakistan, the government has shared a roadmap based upon nine-point agenda for ensuring sustained and inclusive economic growth, including ensuring structural changes by focusing on export growth instead of import substitution.
“Pakistan has made significant headway inspite of many challenges that it has faced. The nation was able to transform itself into a semi-industrial economy and hub for business activities,” it was stated in the first-ever but a detailed report titled “75-Years-Economic Journey of Pakistan” released by the Ministry of Finance just a day ahead on the occasion of Independence Day of Pakistan on Saturday.
The report states that the country’s GDP growth stood at 1.8 percent in 1950, which has now increased to 5.97 percent in 2022.
Pakistan’s per capita income stood at $86 in 1950, which had now jumped up to $1,798 in 2022. The size of Pakistan’s economy was hovering around $3 billion in 1950, which had increased to $383 billion in 2022. The country’s exports were standing at $163.9 million in 1949, which had now jumped up to $32.5 billion. The country’s imports were standing at $355.5 million in 1949 which has now increased to $72 billion in 2022. The report highlighted green revolution, construction of Tarbela Dam, industrialization phase, separation of East Pakistan, construction of national highways, nuclear explosion in 1998, Islamic banking, women into parliament, China Pakistan Economic Corridor (CPEC) and moving towards digital Pakistan.
It states that the nine-point agenda comprised ensuring structural changes by focusing on export growth instead of import substitution, increase in GDP growth to 6-7 percent in the medium term, sustain growth rate over the medium and long term without creating pressure on balance of payments, reduce poverty by ensuring high and inclusive growth and strengthening social safety nets, improve tourism and information technology, improve investment climate and attract domestic and foreign investment through effective implementation on investment promotion strategy, establish special economic zones focusing on export promotion, import substitution and employment generation, make youth strength of the nation through various youth skills development program and to realise these objectives, short-medium and long term economic programs are underway for all sectors of the economy, including agriculture, industry and services.
In crux, the aspiration is to put the economy on a higher growth trajectory through higher investment, efficiency and enhanced productivity.
While dwelling upon historic achievements, the report states that the prevalence of poverty stood at 40.24 percent in 1963-64 but now it has reduced to 21.9 percent in 2018-19 despite changing its methodology on more comprehensive basis by calculating poverty on basis of cost of basic needs.
The numbers of employed labour force increased from 16.24 million in 1963-64 to 67.25 million in 2020-21. The size of population stood at 65.3 million in 1972, which has now increased to 207.7 million on the basis of last population census held in 2017. It is estimated that now the population might have touched 227 million in 2022. The total number of registered vehicles were standing at 31,892 in 1947, which had now touched 32.4 million in 2021. The total number of telephone and mobile users stood at 15200 in 1947, which had now touched to 194.2 million in 2021. The life expectancy now touched 67.4 years in Pakistan.
The health expenditures were just meager and stood at Rs one million in 1947, which had now touched 657.185 billion in 2020-21. The infant mortality rate was standing at 150-180 per thousand, which now increased to 58.8 per thousand in 2021. The number of public sector hospitals were just 292 in 1947 which had now increased to 1276 in 2021. The number of universities were just 2 in 1947, which now stood at 233 universities in 2021.
Total number of Degree Colleges stood at 40 in 1959-60, which had now increased to 3,872 in 2021. The total number of technical and vocational institutions were just 46 in 1947-48 that now increased to 3,914 in 2020-21. The number of primary schools were just 8.4 thousand in 1947-48, which had now increased to 187.9 thousand in 2021.
The employment in universities touched 2,000,000 now. The overall literacy in the country increased from 16.4 percent in 1951 to 68.2 percent in 2020-21. The remittances sent by Pakistanis living abroad were standing at just 0.14 billion in 1973, which had now jumped up to $31.2 billion in 2021. The foreign direct investment fetched by the country to the tune of $1.2 million in FY1950 had now increased to $1,867.7 million in FY2022.
The share of indirect taxes and direct taxes stood at 78 and 22 percent respectively in 1960s, which now stood at 39 percent by direct taxes and 61 percent by indirect taxes in 2020s. The size of public sector development programme (PSDP) has varied over the years depending upon available fiscal space but it stood at around Rs800 billion. The share of manufacturing at the beginning was standing at 80 percent but now it stood at 65 percent. Wheat production stood at 3.354 million tons in 1948, which had now increased to 26.394 million tons in 2022.
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Saudi Arabia plans to renew its $3 billion deposit in assistance to Pakistan which looks to rein in one of Asia’s highest inflation rates and stave off a current-account crisis
RIYADH: Saudi Arabia plans to renew its $3 billion deposit in assistance to Pakistan, as the South Asian nation looks to rein in one of Asia’s highest inflation rates and stave off a current-account crisis, according to people familiar with the matter.
The Saudi Finance Ministry plans to renew its $3 billion deposit with State Bank of Pakistan as soon as this week, the sources said, asking not to be identified discussing private deliberations, Bloomberg reported on Saturday.
The kingdom also plans to provide $100 million a month for 10 months in petroleum products that will be granted as additional support, the sources added.
Pakistan’s funding gap has been covered after the kingdom’s commitment, the sources said, adding that the assurance will pave the way for the International Monetary Fund’s loan approval at the end of the month. Saudi Arabia has been coordinating with the IMF to ensure that Pakistan is fully supported, one of the sources said. The commitment can be announced within the next two days, said one of the sources. Representatives for Saudi Arabia and Pakistan’s Finance Ministry didn’t immediately respond to messages seeking comment.
The aid comes as the IMF has been looking to assess Saudi Arabia’s commitment to financing Pakistan before the multilateral lender disburses fresh funds to the South Asian nation. Bloomberg reported in July that the IMF wanted to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad does not have a funding gap after the IMF loan.
Saudi Arabia extended support multiple times to Pakistan. It pledged $4.2 billion in assistance to Pakistan when the former prime minister, Imran Khan, visited the kingdom. That included a deposit of $3 billion with the State Bank of Pakistan to help shore up its reserves and a facility to finance oil derivatives trade worth $1.2 billion during the year.
Saudi Arabia discussed extending the term of its $3 billion deposit with Pakistan when Prime Minister Shehbaz Sharif met the kingdom’s Crown Prince Mohammed bin Salman in May.
Mehtab Haider adds from Islamabad: On the eve of 75 years of economic journey of Pakistan, the government has shared a roadmap based upon nine-point agenda for ensuring sustained and inclusive economic growth, including ensuring structural changes by focusing on export growth instead of import substitution.
“Pakistan has made significant headway inspite of many challenges that it has faced. The nation was able to transform itself into a semi-industrial economy and hub for business activities,” it was stated in the first-ever but a detailed report titled “75-Years-Economic Journey of Pakistan” released by the Ministry of Finance just a day ahead on the occasion of Independence Day of Pakistan on Saturday.
The report states that the country’s GDP growth stood at 1.8 percent in 1950, which has now increased to 5.97 percent in 2022.
Pakistan’s per capita income stood at $86 in 1950, which had now jumped up to $1,798 in 2022. The size of Pakistan’s economy was hovering around $3 billion in 1950, which had increased to $383 billion in 2022. The country’s exports were standing at $163.9 million in 1949, which had now jumped up to $32.5 billion. The country’s imports were standing at $355.5 million in 1949 which has now increased to $72 billion in 2022. The report highlighted green revolution, construction of Tarbela Dam, industrialization phase, separation of East Pakistan, construction of national highways, nuclear explosion in 1998, Islamic banking, women into parliament, China Pakistan Economic Corridor (CPEC) and moving towards digital Pakistan.
It states that the nine-point agenda comprised ensuring structural changes by focusing on export growth instead of import substitution, increase in GDP growth to 6-7 percent in the medium term, sustain growth rate over the medium and long term without creating pressure on balance of payments, reduce poverty by ensuring high and inclusive growth and strengthening social safety nets, improve tourism and information technology, improve investment climate and attract domestic and foreign investment through effective implementation on investment promotion strategy, establish special economic zones focusing on export promotion, import substitution and employment generation, make youth strength of the nation through various youth skills development program and to realise these objectives, short-medium and long term economic programs are underway for all sectors of the economy, including agriculture, industry and services.
In crux, the aspiration is to put the economy on a higher growth trajectory through higher investment, efficiency and enhanced productivity.
While dwelling upon historic achievements, the report states that the prevalence of poverty stood at 40.24 percent in 1963-64 but now it has reduced to 21.9 percent in 2018-19 despite changing its methodology on more comprehensive basis by calculating poverty on basis of cost of basic needs.
The numbers of employed labour force increased from 16.24 million in 1963-64 to 67.25 million in 2020-21. The size of population stood at 65.3 million in 1972, which has now increased to 207.7 million on the basis of last population census held in 2017. It is estimated that now the population might have touched 227 million in 2022. The total number of registered vehicles were standing at 31,892 in 1947, which had now touched 32.4 million in 2021. The total number of telephone and mobile users stood at 15200 in 1947, which had now touched to 194.2 million in 2021. The life expectancy now touched 67.4 years in Pakistan.
The health expenditures were just meager and stood at Rs one million in 1947, which had now touched 657.185 billion in 2020-21. The infant mortality rate was standing at 150-180 per thousand, which now increased to 58.8 per thousand in 2021. The number of public sector hospitals were just 292 in 1947 which had now increased to 1276 in 2021. The number of universities were just 2 in 1947, which now stood at 233 universities in 2021.
Total number of Degree Colleges stood at 40 in 1959-60, which had now increased to 3,872 in 2021. The total number of technical and vocational institutions were just 46 in 1947-48 that now increased to 3,914 in 2020-21. The number of primary schools were just 8.4 thousand in 1947-48, which had now increased to 187.9 thousand in 2021.
The employment in universities touched 2,000,000 now. The overall literacy in the country increased from 16.4 percent in 1951 to 68.2 percent in 2020-21. The remittances sent by Pakistanis living abroad were standing at just 0.14 billion in 1973, which had now jumped up to $31.2 billion in 2021. The foreign direct investment fetched by the country to the tune of $1.2 million in FY1950 had now increased to $1,867.7 million in FY2022.
The share of indirect taxes and direct taxes stood at 78 and 22 percent respectively in 1960s, which now stood at 39 percent by direct taxes and 61 percent by indirect taxes in 2020s. The size of public sector development programme (PSDP) has varied over the years depending upon available fiscal space but it stood at around Rs800 billion. The share of manufacturing at the beginning was standing at 80 percent but now it stood at 65 percent. Wheat production stood at 3.354 million tons in 1948, which had now increased to 26.394 million tons in 2022.
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Pakistan to get $2bn from Qatar: SBP
The country will also get $1 billion in oil financing from Saudi Arabia
KARACHI: Pakistan will receive $2 billion from Qatar in bilateral support to help ease the South Asian nation’s funding crunch and the consequent risk of a default, the central bank said on Monday.
The country will also get $1 billion in oil financing from Saudi Arabia and a similar amount in investments from the UAE. All the funds are expected over twelve months, Murtaza Syed, deputy governor at the State Bank of Pakistan (SBP) said in a briefing. Prime Minister Shehbaz Sharif is visiting Qatar on August 23 (today) and 24. “An announcement of the assistance may or may not be announced during the trip,” Syed said.
The pledges come before an International Monetary Fund (IMF) board meeting on August 29 that could lead to the release of $1.2 billion in financing. Arab nations had committed to supporting Pakistan only after it secured an IMF programme, while the Washington-based lender has been seeking a commitment from Saudi Arabia.
The Pakistan rupee is the best performer globally this month and has gained 11 percent since dropping to a record low last month as worries over a possible default fade, according to data tracked by Bloomberg.
The SBP, meanwhile, left its benchmark interest rate unchanged due to easing external financing worries amid indications that the country may soon receive a bailout approval from the IMF.
Consistent with market expectations, the SBP’s Monetary Policy Committee (MPC) kept the policy rate at 15 percent as it thought it was wise to let several recent steps taken to cool the overheated economy and curb the current account deficit, such as monetary tightening, import control measures, and a robust fiscal consolidation plan, work their way through the system.
“With recent inflation developments in line with expectations, domestic demand beginning to moderate, and the external position showing some improvement, the MPC felt that it was prudent to take a pause at this stage,” the SBP said in a statement.
The policy rate has been hiked by a cumulative 800 basis points since September 2021. Last time, the SBP kept the borrowing cost steady in March 2022. “The headline inflation rose further to 24.9 percent in July, with core inflation also ticking up. This was expected given the necessary reversal of the energy subsidy package—effects of which will continue to manifest in inflation out-turns throughout the rest of the fiscal year—as well as momentum in the prices of essential food items and exchange rate weakness last month,” it added.
The trade balance fell sharply in July and the rupee reversed course during August, appreciating by around 10 percent on improved fundamentals and sentiment, it noted. The SBP said it will continue to monitor inflation outturns and global commodity prices.
“Looking ahead, the MPC intends to remain data-dependent, paying close attention to month-on-month inflation, inflation expectations, developments on the fiscal and external fronts, as well as global commodity prices and interest rate decisions by major central banks,” it said.
The SBP sees the IMF’s board approve a $1.2 billion tranche on August 29, which will help unlock funding from multilateral and bilateral lenders. In addition, Pakistan has also successfully secured an additional $4 billion from friendly countries over and above its external financing needs in FY2023. As a result, the foreign exchange reserves will be further augmented through the course of the year, helping to reduce external vulnerability.
The SBP expects the forex reserves to rise to around $16 billion this fiscal year. “To ensure this and to support the rupee going forward, it will be important to contain the current account deficit to around 3 percent of GDP by moderating domestic demand and energy imports. In addition, it will be critical to keep the IMF programme on-track by following through on the agreed fiscal tightening and structural reforms over the next 12 months,” it said.
Encouragingly, there is evidence that inflation expectations of businesses have eased significantly. Looking ahead, headline inflation is projected to peak in the first quarter before declining gradually through the rest of the fiscal year, according to the SBP.
Thereafter, inflation is expected to decline sharply and fall to the 5-7 percent target range by the end of FY2024, supported by the lagged effects of tight monetary and fiscal policies, the normalisation of global commodity prices, and beneficial base effects, it noted.
The SBP thinks this baseline outlook remains subject to uncertainty, with risks arising from the path of global commodity prices, the domestic fiscal policy stance, and the exchange rate. Pakistan’s external financing requirement (including current account deficit) will be slightly above $30 billion for FY2023 against available financing (including IMF) of around $37 billion, therefore over financed by $7 billion, said Arif Habib Limited, citing post-monetary policy analysts briefing given by the SBP Acting Governor Dr Murtaza Syed.
The breakdown of commitment of $4 billion from friendly countries includes $2 billion from Qatar, $1 billion from Saudi Arabia (deferred oil facility), and $1 billion from UAE (investment). These amounts are expected to be received over the next twelve months.
Pakistan’s short-term external debt is only six percent of its total external debt. The problem the country is having this year is the external debt repayments have bunched up, not due to any maturity problem, the SBP’s acting governor said.
Fiscal consolidation of around three percent of GDP given the election year will be challenging but this is what we have agreed with the IMF and to make this achievable, in acting governor’s view, we need to bring more people into the tax net.
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The country will also get $1 billion in oil financing from Saudi Arabia
KARACHI: Pakistan will receive $2 billion from Qatar in bilateral support to help ease the South Asian nation’s funding crunch and the consequent risk of a default, the central bank said on Monday.
The country will also get $1 billion in oil financing from Saudi Arabia and a similar amount in investments from the UAE. All the funds are expected over twelve months, Murtaza Syed, deputy governor at the State Bank of Pakistan (SBP) said in a briefing. Prime Minister Shehbaz Sharif is visiting Qatar on August 23 (today) and 24. “An announcement of the assistance may or may not be announced during the trip,” Syed said.
The pledges come before an International Monetary Fund (IMF) board meeting on August 29 that could lead to the release of $1.2 billion in financing. Arab nations had committed to supporting Pakistan only after it secured an IMF programme, while the Washington-based lender has been seeking a commitment from Saudi Arabia.
The Pakistan rupee is the best performer globally this month and has gained 11 percent since dropping to a record low last month as worries over a possible default fade, according to data tracked by Bloomberg.
The SBP, meanwhile, left its benchmark interest rate unchanged due to easing external financing worries amid indications that the country may soon receive a bailout approval from the IMF.
Consistent with market expectations, the SBP’s Monetary Policy Committee (MPC) kept the policy rate at 15 percent as it thought it was wise to let several recent steps taken to cool the overheated economy and curb the current account deficit, such as monetary tightening, import control measures, and a robust fiscal consolidation plan, work their way through the system.
“With recent inflation developments in line with expectations, domestic demand beginning to moderate, and the external position showing some improvement, the MPC felt that it was prudent to take a pause at this stage,” the SBP said in a statement.
The policy rate has been hiked by a cumulative 800 basis points since September 2021. Last time, the SBP kept the borrowing cost steady in March 2022. “The headline inflation rose further to 24.9 percent in July, with core inflation also ticking up. This was expected given the necessary reversal of the energy subsidy package—effects of which will continue to manifest in inflation out-turns throughout the rest of the fiscal year—as well as momentum in the prices of essential food items and exchange rate weakness last month,” it added.
The trade balance fell sharply in July and the rupee reversed course during August, appreciating by around 10 percent on improved fundamentals and sentiment, it noted. The SBP said it will continue to monitor inflation outturns and global commodity prices.
“Looking ahead, the MPC intends to remain data-dependent, paying close attention to month-on-month inflation, inflation expectations, developments on the fiscal and external fronts, as well as global commodity prices and interest rate decisions by major central banks,” it said.
The SBP sees the IMF’s board approve a $1.2 billion tranche on August 29, which will help unlock funding from multilateral and bilateral lenders. In addition, Pakistan has also successfully secured an additional $4 billion from friendly countries over and above its external financing needs in FY2023. As a result, the foreign exchange reserves will be further augmented through the course of the year, helping to reduce external vulnerability.
The SBP expects the forex reserves to rise to around $16 billion this fiscal year. “To ensure this and to support the rupee going forward, it will be important to contain the current account deficit to around 3 percent of GDP by moderating domestic demand and energy imports. In addition, it will be critical to keep the IMF programme on-track by following through on the agreed fiscal tightening and structural reforms over the next 12 months,” it said.
Encouragingly, there is evidence that inflation expectations of businesses have eased significantly. Looking ahead, headline inflation is projected to peak in the first quarter before declining gradually through the rest of the fiscal year, according to the SBP.
Thereafter, inflation is expected to decline sharply and fall to the 5-7 percent target range by the end of FY2024, supported by the lagged effects of tight monetary and fiscal policies, the normalisation of global commodity prices, and beneficial base effects, it noted.
The SBP thinks this baseline outlook remains subject to uncertainty, with risks arising from the path of global commodity prices, the domestic fiscal policy stance, and the exchange rate. Pakistan’s external financing requirement (including current account deficit) will be slightly above $30 billion for FY2023 against available financing (including IMF) of around $37 billion, therefore over financed by $7 billion, said Arif Habib Limited, citing post-monetary policy analysts briefing given by the SBP Acting Governor Dr Murtaza Syed.
The breakdown of commitment of $4 billion from friendly countries includes $2 billion from Qatar, $1 billion from Saudi Arabia (deferred oil facility), and $1 billion from UAE (investment). These amounts are expected to be received over the next twelve months.
Pakistan’s short-term external debt is only six percent of its total external debt. The problem the country is having this year is the external debt repayments have bunched up, not due to any maturity problem, the SBP’s acting governor said.
Fiscal consolidation of around three percent of GDP given the election year will be challenging but this is what we have agreed with the IMF and to make this achievable, in acting governor’s view, we need to bring more people into the tax net.
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Pakistan has given an undertaking to the International Monetary Fund (IMF) that it will not grant further tax amnesties without approval of the National Assembly.
In signed Letter of Intent (LoI) shared with the IMF’s Executive Board, Pakistan has given undertaking in writing that they would not grant any further tax amnesty. The completion of combined 7th and 8th reviews would be done and release of next tranche worth of $1.17 billion would be granted on August 29 in Washington on the basis of this LoI. The government will be bound to seek approval of National Assembly on tax amnesty and granting tax exemptions.
The LoI further gave assurances to the IMF that the Center and provincial governments would move towards harmonisation of GST on goods and services. The GST on goods is the domain of the federal government while GST on services is the jurisdiction of the provinces under the existing constitutional arrangement. Pakistan had sought financial assistance from the World Bank for harmonising the GST. On occasion of every review, Pakistan always give assurances to the Fund staff that it would not grant further tax amnesties.
In signed Letter of Intent (LoI) shared with the IMF’s Executive Board, Pakistan has given undertaking in writing that they would not grant any further tax amnesty. The completion of combined 7th and 8th reviews would be done and release of next tranche worth of $1.17 billion would be granted on August 29 in Washington on the basis of this LoI. The government will be bound to seek approval of National Assembly on tax amnesty and granting tax exemptions.
The LoI further gave assurances to the IMF that the Center and provincial governments would move towards harmonisation of GST on goods and services. The GST on goods is the domain of the federal government while GST on services is the jurisdiction of the provinces under the existing constitutional arrangement. Pakistan had sought financial assistance from the World Bank for harmonising the GST. On occasion of every review, Pakistan always give assurances to the Fund staff that it would not grant further tax amnesties.
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The government has explored an option to seek rescheduling of its external debt, as Pakistan faces a mammoth challenge to service over two-third or $66 billion of the total external public and publicly-guaranteed repayments in five years.
The $66 billion external debt repayments are exclusive of interest payments on these loans that are also estimated at $9.4 billion over the same period.
However, both the finance and economic affairs ministries did not find the rescheduling as the best option, as the majority of the external public debt did not qualify for rescheduling until a default was declared, highly placed sources told The Express Tribune.
A meeting took place on Monday in the economic affairs ministry. It was attended by Economic Affairs Minister Sardar Ayaz Sadiq and Minister of State for Finance Dr Aisha Pasha.
It emerged during the meeting that seeking debt rescheduling would be tantamount to declaring default on its debt obligations that was not desirable at this critical time, the source added.
The details showed that the government reviewed the total external public and publicly-guaranteed debt stock of over $97 billion.
It carried the possibility of identifying the debt volume that could be taken up with the international creditors for rescheduling.
An official of the economic affairs ministry said about $66 billion external public and publicly-guaranteed debt was maturing from fiscal year 2022-23 to 2026-27.
However, a bigger chunk of the $97 billion external public and publicly-guaranteed debt -- the $74 billion – could not be considered for rescheduling.
“The finance ministry is opposing any debt rescheduling and our collaboration with the economic affairs ministry is for the sake of finding ways to enhance disbursements of already signed loans and searching new windows for additional financial support to meet the financing requirements,” said State Minister Finance Dr Aisha.
The monthly debt bulletin report showed that the international lenders disbursed just $179 million worth of loans in July, as the foreign inflows have come to a standstill in absence of the International Monetary Fund (IMF) umbrella.
Out of $179 million, an amount of $100 million was on account of the Saudi oil facility on deferred payments.
Another sum of $65 million was disbursed by the World Bank, according to the economic affairs ministry.
When contacted, a senior official of the economic affairs ministry said they had suggested to diversify the development financing portfolios and to reach out to the international partners for diversification of the commodity financing operations.
He added that the economic affairs ministry was of the view that only safe deposits could be rolled over.
The sources said it was discussed during the meeting that only $16 billion external public and publicly-guaranteed debt could be rescheduled – loans largely extended by China.
The Chinese debt is mostly concessional, according to the economic affairs ministry.
Pakistan owes $26.8 billion to China on account of bilateral and guaranteed debt, according to the sources.
It was discussed during the meeting that the debt servicing of Chinese bilateral and guaranteed loans in the next five years would stand at $5.3 billion.
The commercial Chinese loans servicing was, in addition to this, could not be rescheduled, according to the sources.
The Chinese commercial loans amount to $6.5 billion while another $4 billion are on account of state administration of foreign exchange (SAFE) deposits. The sources said the SAFE deposits could be rolled over for an extended period of up to five years to reduce related risks.
According to the economic affairs ministry, Pakistan’s non-concessional commercial debt stock was $25.3 billion on account of bonds, cash deposits and commercial loans.
The country needs $36.5 billion in the next five years to service this debt.
This sum includes $8.8 billion worth of sovereign bonds, $7 billion cash deposits and $9.5 billion worth of commercial loans.
The sources said that the Saudi SAFE deposit of $3 billion is expected to be rolled over in December.
However, the meeting was informed that the rescheduling of the $18 billion commercial loans and sovereign bonds was not feasible, as seeking such relief would mean declaration of a default.
The stock of the multilateral debt was $35.4 billion, which was mostly concessional.
During the next five years, the country needs $13.7 billion for its debt servicing. The meeting was told that the multilateral creditors did not offer rescheduling except for a few cases where the debtor country had to declare itself as a highly indebted and poor country (HIPC).
Pakistan’s bilateral debt stock was over $20 billion and it needs $10.6 billion for servicing in five years.
The country has already availed $3.7 billion worth of debt rescheduling from the group of G-20 nations to cushion against the negative impacts of the coronavirus pandemic.
The $20 billion is inclusive of $16 billion Chinese bilateral debt.
The sources said the Paris Club creditors were currently offering rescheduling under the G-20 Common Framework but it required rescheduling of commercial loans in addition to bilateral debt which was equivalent to declaration of a default. This option was also ruled out during the meeting.
The $66 billion external debt repayments are exclusive of interest payments on these loans that are also estimated at $9.4 billion over the same period.
However, both the finance and economic affairs ministries did not find the rescheduling as the best option, as the majority of the external public debt did not qualify for rescheduling until a default was declared, highly placed sources told The Express Tribune.
A meeting took place on Monday in the economic affairs ministry. It was attended by Economic Affairs Minister Sardar Ayaz Sadiq and Minister of State for Finance Dr Aisha Pasha.
It emerged during the meeting that seeking debt rescheduling would be tantamount to declaring default on its debt obligations that was not desirable at this critical time, the source added.
The details showed that the government reviewed the total external public and publicly-guaranteed debt stock of over $97 billion.
It carried the possibility of identifying the debt volume that could be taken up with the international creditors for rescheduling.
An official of the economic affairs ministry said about $66 billion external public and publicly-guaranteed debt was maturing from fiscal year 2022-23 to 2026-27.
However, a bigger chunk of the $97 billion external public and publicly-guaranteed debt -- the $74 billion – could not be considered for rescheduling.
“The finance ministry is opposing any debt rescheduling and our collaboration with the economic affairs ministry is for the sake of finding ways to enhance disbursements of already signed loans and searching new windows for additional financial support to meet the financing requirements,” said State Minister Finance Dr Aisha.
The monthly debt bulletin report showed that the international lenders disbursed just $179 million worth of loans in July, as the foreign inflows have come to a standstill in absence of the International Monetary Fund (IMF) umbrella.
Out of $179 million, an amount of $100 million was on account of the Saudi oil facility on deferred payments.
Another sum of $65 million was disbursed by the World Bank, according to the economic affairs ministry.
When contacted, a senior official of the economic affairs ministry said they had suggested to diversify the development financing portfolios and to reach out to the international partners for diversification of the commodity financing operations.
He added that the economic affairs ministry was of the view that only safe deposits could be rolled over.
The sources said it was discussed during the meeting that only $16 billion external public and publicly-guaranteed debt could be rescheduled – loans largely extended by China.
The Chinese debt is mostly concessional, according to the economic affairs ministry.
Pakistan owes $26.8 billion to China on account of bilateral and guaranteed debt, according to the sources.
It was discussed during the meeting that the debt servicing of Chinese bilateral and guaranteed loans in the next five years would stand at $5.3 billion.
The commercial Chinese loans servicing was, in addition to this, could not be rescheduled, according to the sources.
The Chinese commercial loans amount to $6.5 billion while another $4 billion are on account of state administration of foreign exchange (SAFE) deposits. The sources said the SAFE deposits could be rolled over for an extended period of up to five years to reduce related risks.
According to the economic affairs ministry, Pakistan’s non-concessional commercial debt stock was $25.3 billion on account of bonds, cash deposits and commercial loans.
The country needs $36.5 billion in the next five years to service this debt.
This sum includes $8.8 billion worth of sovereign bonds, $7 billion cash deposits and $9.5 billion worth of commercial loans.
The sources said that the Saudi SAFE deposit of $3 billion is expected to be rolled over in December.
However, the meeting was informed that the rescheduling of the $18 billion commercial loans and sovereign bonds was not feasible, as seeking such relief would mean declaration of a default.
The stock of the multilateral debt was $35.4 billion, which was mostly concessional.
During the next five years, the country needs $13.7 billion for its debt servicing. The meeting was told that the multilateral creditors did not offer rescheduling except for a few cases where the debtor country had to declare itself as a highly indebted and poor country (HIPC).
Pakistan’s bilateral debt stock was over $20 billion and it needs $10.6 billion for servicing in five years.
The country has already availed $3.7 billion worth of debt rescheduling from the group of G-20 nations to cushion against the negative impacts of the coronavirus pandemic.
The $20 billion is inclusive of $16 billion Chinese bilateral debt.
The sources said the Paris Club creditors were currently offering rescheduling under the G-20 Common Framework but it required rescheduling of commercial loans in addition to bilateral debt which was equivalent to declaration of a default. This option was also ruled out during the meeting.
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The International Monetary Fund (IMF) sees Pakistan’s economy slowing to around 3.5% due to weakening economic conditions and average inflation rate peaking to nearly 20% by the end of the current fiscal year on the back of currency depreciation and higher commodity prices.
The sources in the Ministry of Finance said that during talks for the completion of the 7th review of the bailout package, the global lender significantly revised its projections for the current fiscal year compared with the assessment that it had made at the time of the last review.
The IMF has shaved Pakistan’s previous year economic growth forecast by 1% to 3.5%. But major adjustment is being made in the inflation rate.
The revised projections will be shared with the IMF board that is going to meet on August 29 to consider Pakistan’s request for a $1.2 billion loan tranche and extend the programme till June next year. After the approval of the board, the IMF will release the medium-term macroeconomic framework projections.
In this week’s monetary policy statement, the State Bank of Pakistan had said that the floods caused by unusually heavy and prolonged monsoon rains created downside risks for agricultural production, especially cotton and seasonal crops, and could weigh on growth this year. But it maintained an earlier projection of 3% to 4%.
The government has set the GDP growth target at 5%.
Read Pressure on rupee to ease after IMF deal
“As against the previous forecast of 7.8% inflation rate for this fiscal year, the IMF has now projected average inflation rate at 19.9% for this fiscal year,” according to the sources.
The IMF had held last review talks in 2021 but the report had been finalized in January this year. Within a span of six months, the IMF has drastically revised its inflation forecast.
The surge in global commodity prices, increasing in fuel and electricity prices coupled with exchange rate depreciation is causing higher inflation in Pakistan in years.
The IMF’s assessment is in line with the SBP projection of 18 to 20% inflation rate, which is almost double than the official target of 11.5%.
The headline inflation rose further to 24.9% in July, with the core inflation also shooting up. The central bank said that the necessary reversal of the energy subsidy package, as well as momentum in the prices of essential food items and exchange rate weakness was fueling inflation.
“New assumptions by the IMF suggest that the average exchange rate at the end of this fiscal year will further depreciate compared to the current price of the dollar in the interbank market,” according to the sources.
Although the IMF does not explicitly give exchange rate in its report, its projection for current account deficit and size of the economy give a fair idea of the rate being used to determine these indicators.
The sources said that the IMF sees the current account deficit at $9.3 billion in this fiscal year, which is lower than the previous estimates due to slowing down of the economy. The deficit is equal to 2.5% of the projected size of the economy for this fiscal year and lower than the central bank’s estimates.
However, the IMF has also lowered its gross foreign exchange reserves target for Pakistan by $4.5 billion, which indicates that the government may never be in a comfortable position and would remain busy in stabilising the foreign exchange reserves.
For programme purposes, the IMF monitors progress on the net international reserves level, but this time the IMF asked Pakistan to also make arrangements for increasing the gross reserves by $6.5 billion.
The sources said, “The IMF now sees foreign exchange reserves increasing to $16.2 billion – sufficient for only two months and three weeks of imports.” In January, the IMF had expected Pakistan’s gross foreign exchange reserves increasing to $20.7 billion.
To meet the reserves’ needs, Pakistan has secured an additional $4 billion from friendly countries over and above its external financing needs.
The central bank said this week that the foreign exchange reserves have halved from $16.4 billion in February to $7.9 billion on August 12th, as official inflows have been outpaced by official outflows.
For the current fiscal year, the IMF has assessed Pakistan’s foreign currency requirements at $40 billon, which includes roughly $34 billion for debt repayments and current account deficit financing and another $6.5 billion for reserves building.
This week, Pakistan reviewed the possibility of seeking rescheduling of its external public and publicly guaranteed debt. However, the plan was shelved, for now, due to its adverse implications on the country’s credit rating and limited scope for rescheduling.
The sources in the Ministry of Finance said that during talks for the completion of the 7th review of the bailout package, the global lender significantly revised its projections for the current fiscal year compared with the assessment that it had made at the time of the last review.
The IMF has shaved Pakistan’s previous year economic growth forecast by 1% to 3.5%. But major adjustment is being made in the inflation rate.
The revised projections will be shared with the IMF board that is going to meet on August 29 to consider Pakistan’s request for a $1.2 billion loan tranche and extend the programme till June next year. After the approval of the board, the IMF will release the medium-term macroeconomic framework projections.
In this week’s monetary policy statement, the State Bank of Pakistan had said that the floods caused by unusually heavy and prolonged monsoon rains created downside risks for agricultural production, especially cotton and seasonal crops, and could weigh on growth this year. But it maintained an earlier projection of 3% to 4%.
The government has set the GDP growth target at 5%.
Read Pressure on rupee to ease after IMF deal
“As against the previous forecast of 7.8% inflation rate for this fiscal year, the IMF has now projected average inflation rate at 19.9% for this fiscal year,” according to the sources.
The IMF had held last review talks in 2021 but the report had been finalized in January this year. Within a span of six months, the IMF has drastically revised its inflation forecast.
The surge in global commodity prices, increasing in fuel and electricity prices coupled with exchange rate depreciation is causing higher inflation in Pakistan in years.
The IMF’s assessment is in line with the SBP projection of 18 to 20% inflation rate, which is almost double than the official target of 11.5%.
The headline inflation rose further to 24.9% in July, with the core inflation also shooting up. The central bank said that the necessary reversal of the energy subsidy package, as well as momentum in the prices of essential food items and exchange rate weakness was fueling inflation.
“New assumptions by the IMF suggest that the average exchange rate at the end of this fiscal year will further depreciate compared to the current price of the dollar in the interbank market,” according to the sources.
Although the IMF does not explicitly give exchange rate in its report, its projection for current account deficit and size of the economy give a fair idea of the rate being used to determine these indicators.
The sources said that the IMF sees the current account deficit at $9.3 billion in this fiscal year, which is lower than the previous estimates due to slowing down of the economy. The deficit is equal to 2.5% of the projected size of the economy for this fiscal year and lower than the central bank’s estimates.
However, the IMF has also lowered its gross foreign exchange reserves target for Pakistan by $4.5 billion, which indicates that the government may never be in a comfortable position and would remain busy in stabilising the foreign exchange reserves.
For programme purposes, the IMF monitors progress on the net international reserves level, but this time the IMF asked Pakistan to also make arrangements for increasing the gross reserves by $6.5 billion.
The sources said, “The IMF now sees foreign exchange reserves increasing to $16.2 billion – sufficient for only two months and three weeks of imports.” In January, the IMF had expected Pakistan’s gross foreign exchange reserves increasing to $20.7 billion.
To meet the reserves’ needs, Pakistan has secured an additional $4 billion from friendly countries over and above its external financing needs.
The central bank said this week that the foreign exchange reserves have halved from $16.4 billion in February to $7.9 billion on August 12th, as official inflows have been outpaced by official outflows.
For the current fiscal year, the IMF has assessed Pakistan’s foreign currency requirements at $40 billon, which includes roughly $34 billion for debt repayments and current account deficit financing and another $6.5 billion for reserves building.
This week, Pakistan reviewed the possibility of seeking rescheduling of its external public and publicly guaranteed debt. However, the plan was shelved, for now, due to its adverse implications on the country’s credit rating and limited scope for rescheduling.
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- Oct 2, 2004
- Runs
- 217,977
Pakistan badly failed to implement 16 of the 28 conditions that the International Monetary Fund (IMF) had set for $1.1 billion tranche, including the core condition to increase foreign exchange reserves that instead have turned negative by a whopping nearly $11 billion.
The failure to meet the conditions has compelled the global lender to slap eight more conditions on Pakistan in addition to giving fresh deadlines to meet the actions that remained unimplemented, showed the combined report of the 7th and 8th programme reviews that the IMF released on Friday.
The report suggests that the global lender had every reason to set tough conditions for the revival of the bailout package due to a bad track record of the government led by the Pakistan Tehreek-e-Insaf.
Some of the conditions that were required to be implemented during the last quarter of the fiscal year were missed due to slippages that occurred before the coalition government came into power.
Also read: IMF approves $1.1b tranche for Pakistan
However, the coalition government led by the PML-N, too, could not immediately reverse the course, which would have repaired the trust deficit with the global lender.
The IMF board had to give a waiver this week to pave the way for the revival of the derailed programme and the release of the $1.1 billion tranche.
The country missed the conditions to increase its foreign exchange reserves and reduce the primary budget deficit to a sustainable level. It could also not ensure full disbursements to the beneficiaries of the Benazir Income Support Programme, failed to adequately spend on health and education, remained unable to pay the tax refunds and could not restrict the power sector losses.
Former prime minister Imran Khan, who used to be against the tax amnesty scheme but only when he was not in power, gave another tax amnesty scheme, days before his ouster. He also allowed tax exemptions and his government could not push forward the reforms agenda, revealed the report.
“Overall programme performance has remained weak since the completion of the last review (February 2022) and until recently,” according to the report. It added several quantitative criteria were missed and gaps in implementing particularly the fiscal and structural reform agenda arose amid challenging circumstances, including domestic political turmoil and spillovers from the war in Ukraine, but also a “waning decisiveness to push forward agreed reforms”.
Pakistan missed core programme conditions like restricting the net international reserves to negative $4.7 billion by June this year. Instead, the country’s net foreign exchange reserves remained negative by $10.8 billion, according to the report. This was a major slip that exposed Pakistan to the risk of default due to negative reserves levels.
The country’s credibility has hit the rock bottom in the eyes of the international creditors and the players. Some members of the executive board of the IMF also questioned the back paddling in the board meeting that had been held on August 29 to approve the $1.1 billion loan tranche.
The condition to restrict the primary budget deficit to Rs25 billion by June was also missed due to fiscal slippages. Instead the country booked around Rs2 trillion primary budget deficit. The IMF said that the reserves and deficit conditions were also missed for the end-March period.
Pakistan also missed the conditions of not to impose exchange restrictions and discourage multiple currency practices. It also failed to meet the condition of not imposing import restrictions. The coalition government had to take the steps to avoid default after the previous PTI government failed to build sufficient reserves.
Also read: The IMF needs to do more
Pakistan also missed the condition to distribute Rs250 billion funds among the BISP beneficiaries and missed the target by a margin of Rs15 billion. The federal and provincial governments were required to spend Rs2.1 trillion on health and education but the actual spending remained Rs218 billion short of the target.
The Federal Board of Revenue had failed to meet the condition of stopping accumulation of tax refunds arrears and instead added Rs147 billion more into the refunds pool.
The IMF had allowed to add Rs166 billion more in the circular debt in the previous fiscal year but the actual increase in the power sector payment arrears was Rs536 billion, missing the target by Rs370 billion mainly due to delayed tariff adjustments and higher-than-expected generation and financial costs. These targets had also been missed for the end-March 2022 period.
Out of 10 structural benchmarks set to bring reforms, Pakistan missed seven, showed the report.
In violation of its commitment, the PTI government gave yet another tax amnesty scheme before it was ousted from power. It also gave preferential tax treatment to a few favourites one. The previous government also failed to prepare the draft of the Personal Income Tax law at the agreed date of February 2022.
The government also could not ensure timely approval of the new state-owned enterprise (SOE) law. It also failed to make a plan for the phasing out of SBP refinance facilities. The previous government could not honour its commitment for first-stage recapitalisation of two private sector banks that are sinking.
It also could not establish an asset declaration system for the public office holders and the civil servants.
New deadlines and conditions
Due to the failure to meet the conditions, the IMF has now revised the targets and also added new conditions for qualifying the next loan tranches, amounting to $3 billion.
The IMF has asked Pakistan to increase the BISP beneficiary base to nine million families using the NSER by June next year.
Pakistan will have to fully implement the Rs7.91 per unit increase in electricity prices by the start of October to reduce circular debt, which is already under implementation.
It will also have to submit to NEPRA petitions for the July 2023 fuel price adjustment by end-August; and first quarter of this fiscal year quarterly tariff increase petition by end October to fully recover the revenue requirement, including lost revenue from the delayed first-stage Annual Rebasing.
According to the fourth condition, the government will have to adopt a comprehensive strategy to address high levels of non-performing loans (NPLs) in some banks, including by requiring bank-specific plans for reducing NPLs, and to write-off fully provisioned NPLs. This condition should be met by June next year.
The government will also have to initiate orderly liquidation of either or both of the two currently undercapitalised private sector banks by end-May 2023 after these banks failed to meet capital requirements.
The government will have to submit a plan to the federal cabinet to align Pakistan’s early intervention, bank resolution, and crisis management arrangements with international good practices, in line with IMF staff recommendations by end-October 2022.
The government ought to operationalise a Central Monitoring Unit (CMU) within the Ministry of Finance by end-January 2023 to monitor state-owned enterprises.
Importantly, Pakistan will publish a comprehensive review of the anticorruption institutional framework (including the National Accountability Bureau) by a task force with participation and inputs from reputable independent experts with international experience and civil society organisations by end-January 2023.
https://tribune.com.pk/story/2374416/pakistan-failed-to-meet-imf-targets-report
The failure to meet the conditions has compelled the global lender to slap eight more conditions on Pakistan in addition to giving fresh deadlines to meet the actions that remained unimplemented, showed the combined report of the 7th and 8th programme reviews that the IMF released on Friday.
The report suggests that the global lender had every reason to set tough conditions for the revival of the bailout package due to a bad track record of the government led by the Pakistan Tehreek-e-Insaf.
Some of the conditions that were required to be implemented during the last quarter of the fiscal year were missed due to slippages that occurred before the coalition government came into power.
Also read: IMF approves $1.1b tranche for Pakistan
However, the coalition government led by the PML-N, too, could not immediately reverse the course, which would have repaired the trust deficit with the global lender.
The IMF board had to give a waiver this week to pave the way for the revival of the derailed programme and the release of the $1.1 billion tranche.
The country missed the conditions to increase its foreign exchange reserves and reduce the primary budget deficit to a sustainable level. It could also not ensure full disbursements to the beneficiaries of the Benazir Income Support Programme, failed to adequately spend on health and education, remained unable to pay the tax refunds and could not restrict the power sector losses.
Former prime minister Imran Khan, who used to be against the tax amnesty scheme but only when he was not in power, gave another tax amnesty scheme, days before his ouster. He also allowed tax exemptions and his government could not push forward the reforms agenda, revealed the report.
“Overall programme performance has remained weak since the completion of the last review (February 2022) and until recently,” according to the report. It added several quantitative criteria were missed and gaps in implementing particularly the fiscal and structural reform agenda arose amid challenging circumstances, including domestic political turmoil and spillovers from the war in Ukraine, but also a “waning decisiveness to push forward agreed reforms”.
Pakistan missed core programme conditions like restricting the net international reserves to negative $4.7 billion by June this year. Instead, the country’s net foreign exchange reserves remained negative by $10.8 billion, according to the report. This was a major slip that exposed Pakistan to the risk of default due to negative reserves levels.
The country’s credibility has hit the rock bottom in the eyes of the international creditors and the players. Some members of the executive board of the IMF also questioned the back paddling in the board meeting that had been held on August 29 to approve the $1.1 billion loan tranche.
The condition to restrict the primary budget deficit to Rs25 billion by June was also missed due to fiscal slippages. Instead the country booked around Rs2 trillion primary budget deficit. The IMF said that the reserves and deficit conditions were also missed for the end-March period.
Pakistan also missed the conditions of not to impose exchange restrictions and discourage multiple currency practices. It also failed to meet the condition of not imposing import restrictions. The coalition government had to take the steps to avoid default after the previous PTI government failed to build sufficient reserves.
Also read: The IMF needs to do more
Pakistan also missed the condition to distribute Rs250 billion funds among the BISP beneficiaries and missed the target by a margin of Rs15 billion. The federal and provincial governments were required to spend Rs2.1 trillion on health and education but the actual spending remained Rs218 billion short of the target.
The Federal Board of Revenue had failed to meet the condition of stopping accumulation of tax refunds arrears and instead added Rs147 billion more into the refunds pool.
The IMF had allowed to add Rs166 billion more in the circular debt in the previous fiscal year but the actual increase in the power sector payment arrears was Rs536 billion, missing the target by Rs370 billion mainly due to delayed tariff adjustments and higher-than-expected generation and financial costs. These targets had also been missed for the end-March 2022 period.
Out of 10 structural benchmarks set to bring reforms, Pakistan missed seven, showed the report.
In violation of its commitment, the PTI government gave yet another tax amnesty scheme before it was ousted from power. It also gave preferential tax treatment to a few favourites one. The previous government also failed to prepare the draft of the Personal Income Tax law at the agreed date of February 2022.
The government also could not ensure timely approval of the new state-owned enterprise (SOE) law. It also failed to make a plan for the phasing out of SBP refinance facilities. The previous government could not honour its commitment for first-stage recapitalisation of two private sector banks that are sinking.
It also could not establish an asset declaration system for the public office holders and the civil servants.
New deadlines and conditions
Due to the failure to meet the conditions, the IMF has now revised the targets and also added new conditions for qualifying the next loan tranches, amounting to $3 billion.
The IMF has asked Pakistan to increase the BISP beneficiary base to nine million families using the NSER by June next year.
Pakistan will have to fully implement the Rs7.91 per unit increase in electricity prices by the start of October to reduce circular debt, which is already under implementation.
It will also have to submit to NEPRA petitions for the July 2023 fuel price adjustment by end-August; and first quarter of this fiscal year quarterly tariff increase petition by end October to fully recover the revenue requirement, including lost revenue from the delayed first-stage Annual Rebasing.
According to the fourth condition, the government will have to adopt a comprehensive strategy to address high levels of non-performing loans (NPLs) in some banks, including by requiring bank-specific plans for reducing NPLs, and to write-off fully provisioned NPLs. This condition should be met by June next year.
The government will also have to initiate orderly liquidation of either or both of the two currently undercapitalised private sector banks by end-May 2023 after these banks failed to meet capital requirements.
The government will have to submit a plan to the federal cabinet to align Pakistan’s early intervention, bank resolution, and crisis management arrangements with international good practices, in line with IMF staff recommendations by end-October 2022.
The government ought to operationalise a Central Monitoring Unit (CMU) within the Ministry of Finance by end-January 2023 to monitor state-owned enterprises.
Importantly, Pakistan will publish a comprehensive review of the anticorruption institutional framework (including the National Accountability Bureau) by a task force with participation and inputs from reputable independent experts with international experience and civil society organisations by end-January 2023.
https://tribune.com.pk/story/2374416/pakistan-failed-to-meet-imf-targets-report
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These clowns will have burnt through IMF borrowing within a month, if the rest of their bonfire of Pakistani treasury performance is followed.
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- Post of the Week
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UN chief to take up issue of ‘debt swaps’ with IMF, WB for Pakistan
Guterres calls upon the international community to scale up their support for flood-hit people
KARACHI:
UN Secretary-General António Guterres has said that UN will strongly advocate for ‘debt swaps' with IMF and World Bank through which developing countries like Pakistan instead of paying a debt to foreign creditors will be able to use that money to invest in climate resilience, investments in sustainable infrastructure, and green transition of their economies.
He said, “We will go on strongly advocating for these solutions in the meetings with IMF and World Bank, which will take place soon. And, also in G-20 meeting.”
He stated this while talking to media persons on his arrival at Karachi airport on Saturday. PPP chairman and Foreign Minister Bilawal Bhutto Zardari, Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal, and Sindh Chief Minister Syed Murad Ali Shah among others were also present on the occasion.
The UN chief said that he had been strongly advocating for, what they could call ‘debt swaps’ and that was exactly what Pakistan needed. “Instead of paying the debts, being able to invest that money in what the country requires,” he said.
Guterres called upon the international community to scale up their support for the flood-hit Pakistan.
“We see here in Pakistan, the nature is striking back with devastating consequences. I have seen many disasters in the world but I have never seen climate carnage on these scales,” he added.
“I have simply no words to describe what I have seen today,” the UN chief said.
He further said that families had lost their houses and the farmers had lost their crops and their livestock.
“The most emotional moment for me during this visit was to listen to a group of women and men who had sacrificed their possessions so there can be the possibility of rescue,” he said.
Also read: 'Unimaginable' flood devastation, says UNSG during Sukkur visit
The UN secretary-general further said, “The poor people have touched me deeply. I want to pay tributes to gigantic efforts of the Pakistan authorities, civilian and military, national and regional.”
Massive and urgent financial support for Pakistan was need of the hour, he said adding that this is not the question of solidarity, generosity, but it is the question of justice.
Pakistan is paying the price of what I have seen, which is created by others. Climate Change caused by human activities is super charging storms and catastrophes, he added.
The UN chief said that burning of fossil fuel was eating up our planet. The G-20 countries are responsible for 80 per cent of emissions.
He said that all countries with G-20 leading the way, must boost their national emission reduction targets every year until 1.5 degrees Celsius temperature limit is guaranteed.
“I have been demanding very clearly that the world must seriously adopt a programme of in-depth relief for developing countries including middle-income countries like Pakistan that are on the verge of an extremely difficult financial situation.”
Also read: UNSG visits Mohenjo Daro, assures support for conservation
It is completely essential to create a new mechanism, he stressed. Guterres said that rich countries must step up adaptation finance.
PPP chairman and Foreign Minister Bilawal Bhutto Zardari said, “We are all incredibly grieved.”
He said that September was the busiest month for the UN chief with the UN General Assembly to be held later this month.
“Secretary-General took out time to personally visit Pakistan in our time of difficulty and witnessed first-hand the devastation that has been caused by the catastrophic monsoon rains that we faced for many month.”
Bilawal said the UN chief spent the previous day in Islamabad, receiving briefings from national flood response centre. And, today, along with Prime Minister Shehbaz Sharif “we accompanied the secretary-general to visit the flood-hit areas of Balochistan, where he met flood affectees then he visited flood affected areas in Sindh”.
He also visited UNESCO world heritage site Mohenjo Daro, which unfortunately too had been damaged by the monsoon rains.
The people of Pakistan were paying a heavy price in the form of their lives and livelihoods, the PPP chairman said.
Bilawal said that the people of Pakistan contributed less than one per cent to global carbon footprints. He said that response to this crisis must be a global response.
With the help of UN chief, we look forward to working with the global community to build better, to rehabilitate and to reconstruct the lives of our people, he added.
Express Tribune
Guterres calls upon the international community to scale up their support for flood-hit people
KARACHI:
UN Secretary-General António Guterres has said that UN will strongly advocate for ‘debt swaps' with IMF and World Bank through which developing countries like Pakistan instead of paying a debt to foreign creditors will be able to use that money to invest in climate resilience, investments in sustainable infrastructure, and green transition of their economies.
He said, “We will go on strongly advocating for these solutions in the meetings with IMF and World Bank, which will take place soon. And, also in G-20 meeting.”
He stated this while talking to media persons on his arrival at Karachi airport on Saturday. PPP chairman and Foreign Minister Bilawal Bhutto Zardari, Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal, and Sindh Chief Minister Syed Murad Ali Shah among others were also present on the occasion.
The UN chief said that he had been strongly advocating for, what they could call ‘debt swaps’ and that was exactly what Pakistan needed. “Instead of paying the debts, being able to invest that money in what the country requires,” he said.
Guterres called upon the international community to scale up their support for the flood-hit Pakistan.
“We see here in Pakistan, the nature is striking back with devastating consequences. I have seen many disasters in the world but I have never seen climate carnage on these scales,” he added.
“I have simply no words to describe what I have seen today,” the UN chief said.
He further said that families had lost their houses and the farmers had lost their crops and their livestock.
“The most emotional moment for me during this visit was to listen to a group of women and men who had sacrificed their possessions so there can be the possibility of rescue,” he said.
Also read: 'Unimaginable' flood devastation, says UNSG during Sukkur visit
The UN secretary-general further said, “The poor people have touched me deeply. I want to pay tributes to gigantic efforts of the Pakistan authorities, civilian and military, national and regional.”
Massive and urgent financial support for Pakistan was need of the hour, he said adding that this is not the question of solidarity, generosity, but it is the question of justice.
Pakistan is paying the price of what I have seen, which is created by others. Climate Change caused by human activities is super charging storms and catastrophes, he added.
The UN chief said that burning of fossil fuel was eating up our planet. The G-20 countries are responsible for 80 per cent of emissions.
He said that all countries with G-20 leading the way, must boost their national emission reduction targets every year until 1.5 degrees Celsius temperature limit is guaranteed.
“I have been demanding very clearly that the world must seriously adopt a programme of in-depth relief for developing countries including middle-income countries like Pakistan that are on the verge of an extremely difficult financial situation.”
Also read: UNSG visits Mohenjo Daro, assures support for conservation
It is completely essential to create a new mechanism, he stressed. Guterres said that rich countries must step up adaptation finance.
PPP chairman and Foreign Minister Bilawal Bhutto Zardari said, “We are all incredibly grieved.”
He said that September was the busiest month for the UN chief with the UN General Assembly to be held later this month.
“Secretary-General took out time to personally visit Pakistan in our time of difficulty and witnessed first-hand the devastation that has been caused by the catastrophic monsoon rains that we faced for many month.”
Bilawal said the UN chief spent the previous day in Islamabad, receiving briefings from national flood response centre. And, today, along with Prime Minister Shehbaz Sharif “we accompanied the secretary-general to visit the flood-hit areas of Balochistan, where he met flood affectees then he visited flood affected areas in Sindh”.
He also visited UNESCO world heritage site Mohenjo Daro, which unfortunately too had been damaged by the monsoon rains.
The people of Pakistan were paying a heavy price in the form of their lives and livelihoods, the PPP chairman said.
Bilawal said that the people of Pakistan contributed less than one per cent to global carbon footprints. He said that response to this crisis must be a global response.
With the help of UN chief, we look forward to working with the global community to build better, to rehabilitate and to reconstruct the lives of our people, he added.
Express Tribune
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Saudi Arabia rolls over $3bn deposits, says SBP
ISLAMABAD/KARACHI: The Saudi Fund for Development has confirmed the rollover of $3 billion deposit for the State Bank of Pakistan (SBP) maturing on December 5, 2022, for one year.
However, there was no formal announcement from the Kingdom of Saudi Arabia for provision of an additional $1.2 billion oil facility on deferred payment.
The rollover came as a big respite for the country at a time when it is struggling to secure external financing to shore up the foreign exchange reserves.
As of September 9, the SBP’s foreign exchange reserves stood around $8.6 billion, shows the data released by the central bank a few days back.
On the other hand, the IMF has sympathised with Pakistan over the devastating floods but did not commit any additional funding.
The State Bank of Pakistan (SBP) Sunday tweeted, “Saudi Fund for Development has confirmed rollover of $3 billion deposits maturing on 5th Dec 22 for one year. Deposit is placed with SBP and is part of its forex reserves. This reflects continuing strong and special relationship between KSA and Pakistan”.
The $3 billion rollover is part of $8.6 billion foreign exchange reserves held by the State Bank of Pakistan right now.
This $3 billion deposit and $1.2 billion oil facility on deferred payment was provided by KSA in November 2021 during the tenure of PTI-led government. When the incumbent Prime Minister Shehbaz Sharif visited the KSA after assuming power, a request was made for rollover of $4.2 billion for one year as well as provision of additional deposits and oil facility.
The possibility of Saudi Arabia’s Special Drawing Rights (SDRs) of one billion dollar was considered for transferring in favour of Pakistan. However, so far no formal announcement could be made on additional transfer of one billion SDRs and $1.2 billion oil facility on deferred payment.
On November 29, 2021, the KSA had officially announced that in the implementation of Saudi Royal Directive aimed at supporting the economic growth of the Islamic Republic of Pakistan, and on behalf of His Excellency Ahmed Aqeel Al Khateeb, Chairman of the Board of Directors of the Saudi Fund for Development, the CEO of the Fund Sultan bin Abdulrahman Al-Marshad had signed two economic agreements with the Pakistani government amounting to US$4.2 billion.
The first agreement, including a $3 billion deposit provided by the Kingdom of Saudi Arabia to the Central Bank of Pakistan, will help support the country’s foreign currency reserves and help mitigate the adverse effects of the Covid-19 pandemic.
The agreement was signed by Reza Baqer, Governor of the Central Bank of Pakistan, Sultan bin Abdulrahman Al-Marshad, CEO of the Saudi Fund for Development, in the presence of His Excellency the Consul General of the Kingdom in Karachi Bandar bin Fahad Al Dayel at the headquarters of the Central Bank in Karachi.
According to top official sources, the KSA had committed $1 billion investment and made a phone call to Bilawal Bhutto Zardari but afterwards, they are yet noncommittal about provision of an additional $1 billion oil facility on deferred payment.
The News PK
ISLAMABAD/KARACHI: The Saudi Fund for Development has confirmed the rollover of $3 billion deposit for the State Bank of Pakistan (SBP) maturing on December 5, 2022, for one year.
However, there was no formal announcement from the Kingdom of Saudi Arabia for provision of an additional $1.2 billion oil facility on deferred payment.
The rollover came as a big respite for the country at a time when it is struggling to secure external financing to shore up the foreign exchange reserves.
As of September 9, the SBP’s foreign exchange reserves stood around $8.6 billion, shows the data released by the central bank a few days back.
On the other hand, the IMF has sympathised with Pakistan over the devastating floods but did not commit any additional funding.
The State Bank of Pakistan (SBP) Sunday tweeted, “Saudi Fund for Development has confirmed rollover of $3 billion deposits maturing on 5th Dec 22 for one year. Deposit is placed with SBP and is part of its forex reserves. This reflects continuing strong and special relationship between KSA and Pakistan”.
The $3 billion rollover is part of $8.6 billion foreign exchange reserves held by the State Bank of Pakistan right now.
This $3 billion deposit and $1.2 billion oil facility on deferred payment was provided by KSA in November 2021 during the tenure of PTI-led government. When the incumbent Prime Minister Shehbaz Sharif visited the KSA after assuming power, a request was made for rollover of $4.2 billion for one year as well as provision of additional deposits and oil facility.
The possibility of Saudi Arabia’s Special Drawing Rights (SDRs) of one billion dollar was considered for transferring in favour of Pakistan. However, so far no formal announcement could be made on additional transfer of one billion SDRs and $1.2 billion oil facility on deferred payment.
On November 29, 2021, the KSA had officially announced that in the implementation of Saudi Royal Directive aimed at supporting the economic growth of the Islamic Republic of Pakistan, and on behalf of His Excellency Ahmed Aqeel Al Khateeb, Chairman of the Board of Directors of the Saudi Fund for Development, the CEO of the Fund Sultan bin Abdulrahman Al-Marshad had signed two economic agreements with the Pakistani government amounting to US$4.2 billion.
The first agreement, including a $3 billion deposit provided by the Kingdom of Saudi Arabia to the Central Bank of Pakistan, will help support the country’s foreign currency reserves and help mitigate the adverse effects of the Covid-19 pandemic.
The agreement was signed by Reza Baqer, Governor of the Central Bank of Pakistan, Sultan bin Abdulrahman Al-Marshad, CEO of the Saudi Fund for Development, in the presence of His Excellency the Consul General of the Kingdom in Karachi Bandar bin Fahad Al Dayel at the headquarters of the Central Bank in Karachi.
According to top official sources, the KSA had committed $1 billion investment and made a phone call to Bilawal Bhutto Zardari but afterwards, they are yet noncommittal about provision of an additional $1 billion oil facility on deferred payment.
The News PK
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Pakistan asks WB to divert $2bn funds to flood-hit areas
Islamabad also requests WB to explore possibilities for additional funding for reconstruction of flood-hit areas
ISLAMABAD: Pakistan has requested the World Bank to divert $1.5 billion to $2 billion funding from slow-moving projects to the flood-affected areas of Pakistan under the repurpose programme. Islamabad also requested the WB to explore possibilities for additional funding for the reconstruction of flood-hit areas.
So far, the WB has indicated repurposing $850 million in addition to $350 million already committed by the bank to divert towards flood-hit areas. When contacted, Minister of State for Finance Aisha Ghaus Pasha on Thursday said they asked the WB to explore possibilities to divert resources of $2 billion from slow-moving projects to flood-affected areas. She said the WB would work out details and then inform Islamabad about its decision on repurposing funds. She said Pakistan also requested the bank to explore additional funding as well, keeping in view medium to long-term requirements of reconstruction purposes.
Sources said there was also a possibility to ask the IMF for additional funding. Federal Minister for Finance and Revenue Miftah Ismail held a virtual meeting with Vice President World Bank Martin Raiser along with Country Director World Bank Najy Benhassine on Thursday. Aisha Ghaus Pasha, senior officers from the Finance Division and the World Bank also attended the meeting. The Finance minister welcomed the delegation to Pakistan and thanked the entire team for their continuous assistance. He apprised the delegation of the devastating impacts of floods. It was shared that one-third of the country was facing floods and a number of crops, especially wheat and cotton, had been severely hit. Such loss would have huge economic repercussions on the economic stability of the country.
RISE-II and PACE-II were also discussed in the meeting. The Finance minister shared that Pakistan was close to completion of RISE-II. Various energy reform proposals were deliberated in the meeting, especially related to solarization of tube-wells.
The VP World Bank appreciated the efforts of the Pakistan government in tackling the current challenging situation due to floods. The delegation recognized that the recent flood crisis played havoc with human lives as well as economic health of the county. The Finance minister thanked the World Bank team for their continuous support and facilitation and also shared that the current government was well-equipped to deal with these challenges. He apprised the delegation that the government was majorly focusing upon rebuilding projects in a climate resilient manner.
The News PK
Islamabad also requests WB to explore possibilities for additional funding for reconstruction of flood-hit areas
ISLAMABAD: Pakistan has requested the World Bank to divert $1.5 billion to $2 billion funding from slow-moving projects to the flood-affected areas of Pakistan under the repurpose programme. Islamabad also requested the WB to explore possibilities for additional funding for the reconstruction of flood-hit areas.
So far, the WB has indicated repurposing $850 million in addition to $350 million already committed by the bank to divert towards flood-hit areas. When contacted, Minister of State for Finance Aisha Ghaus Pasha on Thursday said they asked the WB to explore possibilities to divert resources of $2 billion from slow-moving projects to flood-affected areas. She said the WB would work out details and then inform Islamabad about its decision on repurposing funds. She said Pakistan also requested the bank to explore additional funding as well, keeping in view medium to long-term requirements of reconstruction purposes.
Sources said there was also a possibility to ask the IMF for additional funding. Federal Minister for Finance and Revenue Miftah Ismail held a virtual meeting with Vice President World Bank Martin Raiser along with Country Director World Bank Najy Benhassine on Thursday. Aisha Ghaus Pasha, senior officers from the Finance Division and the World Bank also attended the meeting. The Finance minister welcomed the delegation to Pakistan and thanked the entire team for their continuous assistance. He apprised the delegation of the devastating impacts of floods. It was shared that one-third of the country was facing floods and a number of crops, especially wheat and cotton, had been severely hit. Such loss would have huge economic repercussions on the economic stability of the country.
RISE-II and PACE-II were also discussed in the meeting. The Finance minister shared that Pakistan was close to completion of RISE-II. Various energy reform proposals were deliberated in the meeting, especially related to solarization of tube-wells.
The VP World Bank appreciated the efforts of the Pakistan government in tackling the current challenging situation due to floods. The delegation recognized that the recent flood crisis played havoc with human lives as well as economic health of the county. The Finance minister thanked the World Bank team for their continuous support and facilitation and also shared that the current government was well-equipped to deal with these challenges. He apprised the delegation that the government was majorly focusing upon rebuilding projects in a climate resilient manner.
The News PK
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No ‘debt swap’ talks with Beijing yet, says Bilawal
KARACHI: Foreign Minister Bilawal Bhutto-Zardari said on Thursday that Islamabad had so far not requested a restructuring, deferment or swap of debt owed to China in the wake of the catastrophic floods that hit the country.
In pictures: Devastating floods affect millions in Pakistan
Insisting that whenever such a conversation takes place, it would be on ******tan’s own terms, he said that he would like the country to play the role of a bridge between China and the United States, rather exacerbating tensions or “being a geopolitical football”.
“What China does — whether it’s with Sri Lanka or Pakistan — that’s totally China’s decision. Just like it’s 100 per cent America’s decision in either of these circumstances,” he said in an interview with Foreign Policy’s Ravi Agarwal, who pointed out that Beijing “hasn’t quite come to Pakistan’s aid in a big way” after this year’s catastrophic floods and that even Sri Lanka wasn’t able to get much help from China in the wake of an economic crisis.
Bilawal went on to say: “Rather than being a point of competition or a venue for these divisions (between China and the US) to be exacerbated, I would like Pakistan to continue to play a role that we have in the past. Pakistan originally played a bridge between China and the US, resulting in diplomatic relations between the two countries.”
“And right now, particularly when we’re drowning in floods, I don’t want to play any part in exacerbating any tensions or being a geopolitical football,” Dawn.com reported on Thursday.
“In this time of great geopolitical division, I would much rather play the role of a bridge by uniting these two great powers around working together for climate change.”
The foreign minister hoped that “perhaps, Pakistan’s unique position as a friend of both the US and China could encourage cooperation on this front”.
Bilawal’s remarks come against the backdrop of China and the US engaging in a war of words over assistance for debt and flood relief to Pakistan to help it cope with the consequences of this year’s deluges.
On Monday, US State Secretary Antony Blinken had called on Pakistan to seek debt relief from China while reiterating Washington’s support to Islamabad in these challenging times.
The remarks had drawn a censorious response from China, whose foreign ministry spokesperson Wang Wenbin had called out the US for “passing unwarranted criticism against Pakistan-China cooperation” and urged it to do something “real and beneficial” for the people of Pakistan.
Talking about the history of China-Pakisan ties, he recalled that Islamabad had offered its hand in friendship to Beijing when no one else did. “Now, everybody wants to be friends with China,” he commented, as he went on to elaborate on how China had come to Pakistan’s help in recent times.
Later, in a news conference on Thursday, the foreign minister said that while India and Pakistan should also cooperate to resist climate change.
“Our neighbor is concerned with all the caveats that we have already given. So, in principle, we should cooperate on climate change. Our people are facing the consequences. We should all work together.”
“We should have the moral strength to say that on climate change we should cooperate with India, if we do not work together now, it will affect the entire region, the entire world. We will not have the world that we live in,” he said.
When asked to comment on Secretary Blinken’s statement regarding seeking debt relief from China, the minister said that so far, Islamabad had not made any request for debt-restructuring, deferment or swap. “If we have a conversation with China, it should be between Pakistan and China alone, no one else needs to interfere. Engagement with China should continue. Whenever we have this conversation, it will be between us and China. I hope that it does not become a victim of geopolitics.”
DAWN
KARACHI: Foreign Minister Bilawal Bhutto-Zardari said on Thursday that Islamabad had so far not requested a restructuring, deferment or swap of debt owed to China in the wake of the catastrophic floods that hit the country.
In pictures: Devastating floods affect millions in Pakistan
Insisting that whenever such a conversation takes place, it would be on ******tan’s own terms, he said that he would like the country to play the role of a bridge between China and the United States, rather exacerbating tensions or “being a geopolitical football”.
“What China does — whether it’s with Sri Lanka or Pakistan — that’s totally China’s decision. Just like it’s 100 per cent America’s decision in either of these circumstances,” he said in an interview with Foreign Policy’s Ravi Agarwal, who pointed out that Beijing “hasn’t quite come to Pakistan’s aid in a big way” after this year’s catastrophic floods and that even Sri Lanka wasn’t able to get much help from China in the wake of an economic crisis.
Bilawal went on to say: “Rather than being a point of competition or a venue for these divisions (between China and the US) to be exacerbated, I would like Pakistan to continue to play a role that we have in the past. Pakistan originally played a bridge between China and the US, resulting in diplomatic relations between the two countries.”
“And right now, particularly when we’re drowning in floods, I don’t want to play any part in exacerbating any tensions or being a geopolitical football,” Dawn.com reported on Thursday.
“In this time of great geopolitical division, I would much rather play the role of a bridge by uniting these two great powers around working together for climate change.”
The foreign minister hoped that “perhaps, Pakistan’s unique position as a friend of both the US and China could encourage cooperation on this front”.
Bilawal’s remarks come against the backdrop of China and the US engaging in a war of words over assistance for debt and flood relief to Pakistan to help it cope with the consequences of this year’s deluges.
On Monday, US State Secretary Antony Blinken had called on Pakistan to seek debt relief from China while reiterating Washington’s support to Islamabad in these challenging times.
The remarks had drawn a censorious response from China, whose foreign ministry spokesperson Wang Wenbin had called out the US for “passing unwarranted criticism against Pakistan-China cooperation” and urged it to do something “real and beneficial” for the people of Pakistan.
Talking about the history of China-Pakisan ties, he recalled that Islamabad had offered its hand in friendship to Beijing when no one else did. “Now, everybody wants to be friends with China,” he commented, as he went on to elaborate on how China had come to Pakistan’s help in recent times.
Later, in a news conference on Thursday, the foreign minister said that while India and Pakistan should also cooperate to resist climate change.
“Our neighbor is concerned with all the caveats that we have already given. So, in principle, we should cooperate on climate change. Our people are facing the consequences. We should all work together.”
“We should have the moral strength to say that on climate change we should cooperate with India, if we do not work together now, it will affect the entire region, the entire world. We will not have the world that we live in,” he said.
When asked to comment on Secretary Blinken’s statement regarding seeking debt relief from China, the minister said that so far, Islamabad had not made any request for debt-restructuring, deferment or swap. “If we have a conversation with China, it should be between Pakistan and China alone, no one else needs to interfere. Engagement with China should continue. Whenever we have this conversation, it will be between us and China. I hope that it does not become a victim of geopolitics.”
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The resident representative of the International Monetary Fund (IMF) said on Monday that policy commitments made by Pakistani authorities to resume the support programme continue to apply.
"Policy commitments made by the Pakistani authorities as part of the Seventh and Eighth review under their IMF-support programme continue to apply," IMF representative in Islamabad Esther Pérez Ruiz told Reuters.
https://tribune.com.pk/story/2380057/imf-says-policy-commitments-made-by-pakistan-continue-to-apply
"Policy commitments made by the Pakistani authorities as part of the Seventh and Eighth review under their IMF-support programme continue to apply," IMF representative in Islamabad Esther Pérez Ruiz told Reuters.
https://tribune.com.pk/story/2380057/imf-says-policy-commitments-made-by-pakistan-continue-to-apply
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Pakistan won’t approach Paris Club for debt rescheduling, says Dar
Finance minister says country will pay off all its multilateral liabilities on time
Finance Minister Ishaq Dar has announced that Pakistan will not approach Paris Club – a group of wealthy creditor nations — for debt rescheduling amid Moody’s Investors Service’s decision to cut Pakistan’s sovereign credit rating to Caa1 from B3.
Addressing a press conference in Islamabad on Sunday, he said the major reason behind the rating agency’s decision was concerns that Pakistan was seeking the rescheduling of $10 billion worth of debt owed to the Paris Club.
“We have made a very conscious decision that we will not approach Paris Club. We will manage our matters and we will pay off liabilities of multilateral lenders on time,” he said, adding that a strategy for paying back debts has been formulated.
The decision to not seek relief from Paris Club is in sharp contrast to Dar’s predecessor Miftah Ismail move of seeking debt rescheduling from the creditor nations in a bid to create breathing space in the midst of efforts to rehabilitate more than 33 million people affected by devastating floods.
“Given the climate-induced disaster in Pakistan, we are seeking debt relief from bilateral Paris Club creditors,” tweeted the then finance minister Miftah from New York last month.
Speaking about the speculations regarding bonds payments, Finance Minister Dar in today’s media interaction denied the reports that Pakistan was going to postpone the payments for the international bonds.
He said Pakistan will make payments of bonds that are maturing in December this year.
Last month, the price of Pakistan's US dollar-denominated global bonds – Eurobond and Sukuk – slumped while their yields skyrocketed at world markets after Prime Minister Shehbaz Sharif appealed for debt relief from rich nations to cope with the flood-hit economy.
The global bond investors interpreted the prime minister’s appeal as an indicator that the country was going to default on foreign debt repayments. Islamabad is scheduled to repay $1 billion against a maturing Sukuk on December 5, 2022.
Speaking about the IMF programme, the financial czar said the government had no intention of renegotiating an agreement with the global lender and pledged that the country will fulfil all its “sovereign commitments”.
LC payments up to $50,000 to be released
Ishaq Dar said all Letters of Credit (LC) payments up to $50,000 will be released by the next month.
He said the total pending cases of LC payments are 7,952 and 4,400 of them will be resolved after this decision. He said the government is committed to address the concerns of the business community.
Express Tribune
Finance minister says country will pay off all its multilateral liabilities on time
Finance Minister Ishaq Dar has announced that Pakistan will not approach Paris Club – a group of wealthy creditor nations — for debt rescheduling amid Moody’s Investors Service’s decision to cut Pakistan’s sovereign credit rating to Caa1 from B3.
Addressing a press conference in Islamabad on Sunday, he said the major reason behind the rating agency’s decision was concerns that Pakistan was seeking the rescheduling of $10 billion worth of debt owed to the Paris Club.
“We have made a very conscious decision that we will not approach Paris Club. We will manage our matters and we will pay off liabilities of multilateral lenders on time,” he said, adding that a strategy for paying back debts has been formulated.
The decision to not seek relief from Paris Club is in sharp contrast to Dar’s predecessor Miftah Ismail move of seeking debt rescheduling from the creditor nations in a bid to create breathing space in the midst of efforts to rehabilitate more than 33 million people affected by devastating floods.
“Given the climate-induced disaster in Pakistan, we are seeking debt relief from bilateral Paris Club creditors,” tweeted the then finance minister Miftah from New York last month.
Speaking about the speculations regarding bonds payments, Finance Minister Dar in today’s media interaction denied the reports that Pakistan was going to postpone the payments for the international bonds.
He said Pakistan will make payments of bonds that are maturing in December this year.
Last month, the price of Pakistan's US dollar-denominated global bonds – Eurobond and Sukuk – slumped while their yields skyrocketed at world markets after Prime Minister Shehbaz Sharif appealed for debt relief from rich nations to cope with the flood-hit economy.
The global bond investors interpreted the prime minister’s appeal as an indicator that the country was going to default on foreign debt repayments. Islamabad is scheduled to repay $1 billion against a maturing Sukuk on December 5, 2022.
Speaking about the IMF programme, the financial czar said the government had no intention of renegotiating an agreement with the global lender and pledged that the country will fulfil all its “sovereign commitments”.
LC payments up to $50,000 to be released
Ishaq Dar said all Letters of Credit (LC) payments up to $50,000 will be released by the next month.
He said the total pending cases of LC payments are 7,952 and 4,400 of them will be resolved after this decision. He said the government is committed to address the concerns of the business community.
Express Tribune
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Dar moves to secure rescheduling of $27bn in bilateral debt
ISLAMABAD: To secure greater breathing space in foreign loan repayments amid tight external account conditions, Pakistan is seeking rescheduling of bilateral debt, which now stands at around $27 billion.
“Rescheduling of bilateral debt is fine,” said Finance Minister Ishaq Dar while ruling out rescheduling of international debt from wealthy western nations under Paris Club, multilaterals and international sovereign bonds.
Talking to journalists on Monday, the minister said there was no point in Paris Club rescheduling debt, because the overall debt to these creditors was no more than 11pc of total foreign debt and debt relief over the year would be less than $1.2bn. Pakistan owes Paris Club countries a combined sum of around $10.7bn.
“When we are going to arrange $32-34bn for external payments, another $1.2bn is no big issue,” Mr Dar said.
The repayments involve about $22bn worth of foreign debt servicing and about $10-12bn of current account deficit.
As of September 30, the State Bank of Pakistan’s (SBP) foreign exchange reserves stood at $7.89bn while the cou*ntry’s total foreign exchange reserves are reported at $13.6bn, including $5.69bn of commercial bank stocks.
According to the International Monetary Fund (IMF), Pakistan’s total non-Paris Club bilateral debt currently stands at about $27bn, of which Chinese debt is about $23bn.
The US and IMF have been insisting on renegotiation of power purchase agreements with China to secure fiscal space in foreign payments. Non-Paris Club members generally include China, Saudi Arabia and other Middle Eastern states.
Before his weeklong visit to the US to attend annual meetings of the World Bank and IMF besides other important engagements, the minister reaffirmed Pakistan’s commitment to complete the IMF programme with all its conditions in an honourable manner and meet all repayment obligations to multilaterals, bond holders and Paris club creditors.
He said the ninth review with the IMF was scheduled for October 25 and ruled out any consideration for renegotiating the IMF agreement when it was in the last leg of its completion.
The minister also conceded that conditions were not favourable for the launch of a $2bn international bond, budgeted for the current fiscal year, although authorities were planning foreign visits for the purpose.
“I cancelled the itinerary. We can’t issue a bond at this stage,” he said, adding that his priority would be to improve indicators over the next five to six months by hard work and then think about that. To make up for the gap, he said, the government would work hard and find alternative sources. Respon*ding to a question, he said the completion of Fund programme with success and ease in rate of inflation, particularly in energy prices, would bring about a feel-good sense if the government was able to make the people comfortable.
Mr Dar said the IMF programme had only six to seven months to go and he wished its successful completion with honour and dignity and it would be second Fund programme that reached its logical end and both while he led the country’s economic team. He recalled that within days after coming to power in 2013, the PML-N had signed an IMF programme and completed it successfully in 2016.
The minister made it clear that the government would not approach Paris Club or multilaterals for the rescheduling of foreign loans nor extend the date of maturity of international bonds. “Pakistan is an independent and sovereign state and we have to maintain its name, dignity and honour,” he said, adding that the government would have to work hard to ensure all repayments and in time.
The minister now heads to Washington, where central bankers, ministers, private sector executives and people from other walks of life will discuss ways to tackle rising global challenges.
DAWN
ISLAMABAD: To secure greater breathing space in foreign loan repayments amid tight external account conditions, Pakistan is seeking rescheduling of bilateral debt, which now stands at around $27 billion.
“Rescheduling of bilateral debt is fine,” said Finance Minister Ishaq Dar while ruling out rescheduling of international debt from wealthy western nations under Paris Club, multilaterals and international sovereign bonds.
Talking to journalists on Monday, the minister said there was no point in Paris Club rescheduling debt, because the overall debt to these creditors was no more than 11pc of total foreign debt and debt relief over the year would be less than $1.2bn. Pakistan owes Paris Club countries a combined sum of around $10.7bn.
“When we are going to arrange $32-34bn for external payments, another $1.2bn is no big issue,” Mr Dar said.
The repayments involve about $22bn worth of foreign debt servicing and about $10-12bn of current account deficit.
As of September 30, the State Bank of Pakistan’s (SBP) foreign exchange reserves stood at $7.89bn while the cou*ntry’s total foreign exchange reserves are reported at $13.6bn, including $5.69bn of commercial bank stocks.
According to the International Monetary Fund (IMF), Pakistan’s total non-Paris Club bilateral debt currently stands at about $27bn, of which Chinese debt is about $23bn.
The US and IMF have been insisting on renegotiation of power purchase agreements with China to secure fiscal space in foreign payments. Non-Paris Club members generally include China, Saudi Arabia and other Middle Eastern states.
Before his weeklong visit to the US to attend annual meetings of the World Bank and IMF besides other important engagements, the minister reaffirmed Pakistan’s commitment to complete the IMF programme with all its conditions in an honourable manner and meet all repayment obligations to multilaterals, bond holders and Paris club creditors.
He said the ninth review with the IMF was scheduled for October 25 and ruled out any consideration for renegotiating the IMF agreement when it was in the last leg of its completion.
The minister also conceded that conditions were not favourable for the launch of a $2bn international bond, budgeted for the current fiscal year, although authorities were planning foreign visits for the purpose.
“I cancelled the itinerary. We can’t issue a bond at this stage,” he said, adding that his priority would be to improve indicators over the next five to six months by hard work and then think about that. To make up for the gap, he said, the government would work hard and find alternative sources. Respon*ding to a question, he said the completion of Fund programme with success and ease in rate of inflation, particularly in energy prices, would bring about a feel-good sense if the government was able to make the people comfortable.
Mr Dar said the IMF programme had only six to seven months to go and he wished its successful completion with honour and dignity and it would be second Fund programme that reached its logical end and both while he led the country’s economic team. He recalled that within days after coming to power in 2013, the PML-N had signed an IMF programme and completed it successfully in 2016.
The minister made it clear that the government would not approach Paris Club or multilaterals for the rescheduling of foreign loans nor extend the date of maturity of international bonds. “Pakistan is an independent and sovereign state and we have to maintain its name, dignity and honour,” he said, adding that the government would have to work hard to ensure all repayments and in time.
The minister now heads to Washington, where central bankers, ministers, private sector executives and people from other walks of life will discuss ways to tackle rising global challenges.
DAWN
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IMF team due in November for next review
• Official says disbursements to Islamabad expedited in wake of floods
• Warns against using ‘untargeted subsidies’ to counter inflation
• Dar meets US, IMF, WB officials; heckled by PTI activists at airport upon his arrival
WASHINGTON: The Inter*national Monetary Fund (IMF) said on Thursday that it would send a team to Pakistan early next month to start the process for the next review of their current programme.
At a media briefing, journalists asked IMF’s Director of the Middle East and Central Asia Jihad Azour if the Fund would reschedule Pakistan’s debt and provide financial relief to the country to help it deal with the consequences of this year’s unprecedented floods.
They also wanted to know if the IMF was upset with the government’s decision to reduce fuel prices and if Pakistan could meet the Fund’s conditionalities in the current situation.
“The Fund has been very supportive of Pakistan. We have a programme with Pakistan that has been extended and increased in size. This is to help Pakistan deal with a confluence of shocks, starting with the Covid crisis where we provided additional flexibility,” the IMF official responded.
“We accelerated some of our disbursements to help Pakistan deal with recent shocks, such as the increase in prices of foods and commodities,” he said,
“Hopefully, we will be fielding a mission in November, after the annual meetings, to Pakistan to start” the process for the next review, Mr Azour said.
A World Bank and UNDP team, he said, was currently assessing the flood damages and the IMF was waiting for the report to see what’re the repercussions on public finance, and the impact on the economy and the society.
“Based on this assessment, we will update our data and we will also (engage) with the authorities to see what their priorities are and how the Fund can help,” he said.
Warning against subsidies
Mr Azour also urged Pakistan not to give ‘untargeted subsidies’ to consumers as such interventions have always been counterproductive.
Responding to a question about providing subsidies to the people, he said: “As in other parts of the world, a subsidy that is targeted to support certain items, has proved not to be very effective. I would say it has proved to be very regressive.”
In its regional economic outlook, the IMF was again looking at this issue and “it shows that this is not the best way to use a very limited fiscal space that exists,” he said.
“Therefore, we are encouraging Pakistan, as well as other countries, to move away from an untargeted subsidy that’s a waste of resources. And to dedicate those resources to those who need it.”
Mr Azour pointed out that the South and Central Asian region spends two percent of its GDP on social protection, and in certain cases twice as much.
“It is very important to use this when challenges are mounting, where increase in prices is hurting, to reallocate the resources for those who need it the most,” he said.
The IMF official, however, clarified that this observation was not part of the IMF conditionalities. “This is part of what’s needed to provide the right protection to those who need it at a time when the inflation is very high,” he said.
Dar’s engagements
Finance Minister Ishaq Dar also began his official engagements in Washington on Thursday with a meeting with David Lipton, counselor on international affairs to the US Secretary Treasury.
The meeting took place at the Pakistan Embassy and was also attended by Pakistan’s Ambassador Masood Khan.
Later, the finance minister also met IMF Deputy Managing Director Antoinette Sayeh and World Bank Vice President Martin Raiser.
On Wednesday, Mr Dar was intercepted by PTI hecklers when he landed at the Dulles International Airport. A local PML-N leader, Mani Butt, could be seen responding to the hecklers in videos being shared on social media.
DAWN
• Official says disbursements to Islamabad expedited in wake of floods
• Warns against using ‘untargeted subsidies’ to counter inflation
• Dar meets US, IMF, WB officials; heckled by PTI activists at airport upon his arrival
WASHINGTON: The Inter*national Monetary Fund (IMF) said on Thursday that it would send a team to Pakistan early next month to start the process for the next review of their current programme.
At a media briefing, journalists asked IMF’s Director of the Middle East and Central Asia Jihad Azour if the Fund would reschedule Pakistan’s debt and provide financial relief to the country to help it deal with the consequences of this year’s unprecedented floods.
They also wanted to know if the IMF was upset with the government’s decision to reduce fuel prices and if Pakistan could meet the Fund’s conditionalities in the current situation.
“The Fund has been very supportive of Pakistan. We have a programme with Pakistan that has been extended and increased in size. This is to help Pakistan deal with a confluence of shocks, starting with the Covid crisis where we provided additional flexibility,” the IMF official responded.
“We accelerated some of our disbursements to help Pakistan deal with recent shocks, such as the increase in prices of foods and commodities,” he said,
“Hopefully, we will be fielding a mission in November, after the annual meetings, to Pakistan to start” the process for the next review, Mr Azour said.
A World Bank and UNDP team, he said, was currently assessing the flood damages and the IMF was waiting for the report to see what’re the repercussions on public finance, and the impact on the economy and the society.
“Based on this assessment, we will update our data and we will also (engage) with the authorities to see what their priorities are and how the Fund can help,” he said.
Warning against subsidies
Mr Azour also urged Pakistan not to give ‘untargeted subsidies’ to consumers as such interventions have always been counterproductive.
Responding to a question about providing subsidies to the people, he said: “As in other parts of the world, a subsidy that is targeted to support certain items, has proved not to be very effective. I would say it has proved to be very regressive.”
In its regional economic outlook, the IMF was again looking at this issue and “it shows that this is not the best way to use a very limited fiscal space that exists,” he said.
“Therefore, we are encouraging Pakistan, as well as other countries, to move away from an untargeted subsidy that’s a waste of resources. And to dedicate those resources to those who need it.”
Mr Azour pointed out that the South and Central Asian region spends two percent of its GDP on social protection, and in certain cases twice as much.
“It is very important to use this when challenges are mounting, where increase in prices is hurting, to reallocate the resources for those who need it the most,” he said.
The IMF official, however, clarified that this observation was not part of the IMF conditionalities. “This is part of what’s needed to provide the right protection to those who need it at a time when the inflation is very high,” he said.
Dar’s engagements
Finance Minister Ishaq Dar also began his official engagements in Washington on Thursday with a meeting with David Lipton, counselor on international affairs to the US Secretary Treasury.
The meeting took place at the Pakistan Embassy and was also attended by Pakistan’s Ambassador Masood Khan.
Later, the finance minister also met IMF Deputy Managing Director Antoinette Sayeh and World Bank Vice President Martin Raiser.
On Wednesday, Mr Dar was intercepted by PTI hecklers when he landed at the Dulles International Airport. A local PML-N leader, Mani Butt, could be seen responding to the hecklers in videos being shared on social media.
DAWN
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IMF assures Pakistan of support
Jihad Azour says Fund has been very supportive to Pakistan over the last period
ISLAMABAD/WASHINGTON: Jihad Azour, Director of Middle East and Central Asia Department, IMF, stated in Washington, DC, on Friday said the IMF had been waiting for the outcome of loss assessment being worked out by the World Bank and UNDP on the devastating floods in Pakistan, which would become the basis of providing help to the country.
He said that they were saddened by the loss of human lives and livelihoods in Pakistan by the floods. We have already sent and we reiterate our condolences to the people of Pakistan. When asked whether the IMF will consider rescheduling debt to Pakistan amid the devastation due to floods, Jihad Azour replied the Fund has been very supportive to Pakistan over the last period. We have a program with Pakistan that has been extended and increased in size. This is to help Pakistan deal with the confluence of shocks starting with the COVID-19 crisis where we provided additional flexibility. We accelerated some of our disbursement recently to the exogenous shocks and the shock of increase in price of food and commodity. We had recently completed a review that provided Pakistan with $1.2 billion and hopefully we will be fielding a mission in November after the annual meetings to Pakistan in order to start with the authorities preparing for the next review.
We are waiting currently for the assessment of damages the World Bank and UNDP are conducting in order to see the repercussions on public finance and the impact on the economy and on the society.
Based on this assessment, he said, We will need to update our numbers and based on our discussion with the authorities, we will also listen to them to see what are their priorities, and how the Fund can help. Of course, on the issue of subsidy, as in other parts of the world, subsidy that is targeted to support certain items has proved not to be very effective. I would say it has proved to be very regressive. And in our regional economic outlook we are again looking at this issue that is showing that this is not the best way to use the very limited fiscal space that exists. Therefore, we are encouraging Pakistan as well as also other countries to move from an un-targeted subsidy that is a waste of resources and to dedicate those resources to those who need it.
The IMF official said, The region spends on social protection 2 percent of GDP and in certain cases what countries are spending on subsidies could be the double of that. Therefore, it s very important to use this moment where challenges are mounting, where increase in prices is hurting, to reallocate the resources for those who need it most. And this is something that it s not, I would say, part of the IMF conditionalities, this is part of what is needed in order to provide the right protection for those who need it at the time where inflation is very high.
He stated that since the outbreak of the Covid crisis, the IMF has supported both the Middle East and North Africa (MENA) and Caucasus and Central Asia (CCA), plus Afghanistan and Pakistan, with US$21.3 billion in financing. And, in addition, in 2021, it provided, through the SDR allocation, additional boost to reserves by US$49 billion.
Earlier, Federal Minister for Finance & Revenue Senator Ishaq Dar met International Monetary Fund s Deputy Managing Director (DMD) Antoinette Sayeh on Friday in Washington. He told her of the damages caused by the unprecedented floods in Pakistan, and shared with her the government s vision for stabilising the economy and carrying out sustainable and resilient recovery.
The DMD appreciated the government s policies and assured the minister of IMF s continued support to Pakistan. Ishaq Dar, in his meeting with World Bank President David Malpass, thanked the bank for its continued support to socio economic development of Pakistan. He thanked the World Bank for its assistance for rescue and relief operations in the aftermath of unprecedented devastating floods. President Malpass assured that the Bank would continue to work with Pakistan to help it overcome its socio-economic challenges due to the floods.
The finance minister, in a separate meeting with Martin Raiser, Vice President SAR, World Bank, thanked him for undertaking a visit to Pakistan to see firsthand the devastation caused by the floods. The vice president assured him that the bank would continue to support Pakistan in overcoming the economic difficulties that the country was facing.
The minister also met Dr Muhammad Sulaiman Al Jasser, President of the Islamic Development Bank (IDB). Dar thanked him for the IDB s continued engagement with Pakistan. He appreciated that Pakistan and the Bank had remained trusted partners for decades. President Al Jasser appreciated the measures being taken by GoP to stabilise the economy while providing relief to the flood victims.
The finance minister in his meeting with the leadership of Deutsche Bank and J P Morgan elaborated upon the government s vision to stabilise the economy, while also providing relief to the victims of flood. He assured that the GoP was committed to completing the IMF s programme. The delegation also met with rating agencies and participated in several events being held during the annual meetings.
The delegation also engaged at the Pakistan House with a diverse group of Pakistani professionals, including leading businessmen, tech entrepreneurs and others.
The finance minister is leading Pakistan s delegation in the IMF/World Bank s 2022 annual meetings being held in Washington DC. Other delegates include Sardar Ayaz Sadiq, Federal Minister for Economic Affairs, Dr Aisha Ghaus Pasha, Minister of State for Finance & Revenue, Jameel Ahmed, Governor State Bank of Pakistan, Hamed Yaqoob Sheikh, Finance Secretary, Dr Kazim Niaz, Secretary Economic Affairs Division, and Ali Tahir, Additional Secretary, Finance Division.
Meanwhile, a statement issued by the World Bank stated that WB reminded Pakistani officials to focus on the implementation of fiscal and energy reforms to stabilise the economy and lay the foundation for a sustained growth.
The Bank s President, David Malpass, emphasised to Pakistan s delegation, led by Finance Minister Ishaq Dar, the importance of predictable economic policies to restore macroeconomic stability and market confidence, according to the statement issued by the World Bank.
The World Bank statement said that President Malpass encouraged the government to focus on the implementation of Pakistan s fiscal and energy reforms to stabilise the economy and lay the foundation for a sustained growth.
The News PK
Jihad Azour says Fund has been very supportive to Pakistan over the last period
ISLAMABAD/WASHINGTON: Jihad Azour, Director of Middle East and Central Asia Department, IMF, stated in Washington, DC, on Friday said the IMF had been waiting for the outcome of loss assessment being worked out by the World Bank and UNDP on the devastating floods in Pakistan, which would become the basis of providing help to the country.
He said that they were saddened by the loss of human lives and livelihoods in Pakistan by the floods. We have already sent and we reiterate our condolences to the people of Pakistan. When asked whether the IMF will consider rescheduling debt to Pakistan amid the devastation due to floods, Jihad Azour replied the Fund has been very supportive to Pakistan over the last period. We have a program with Pakistan that has been extended and increased in size. This is to help Pakistan deal with the confluence of shocks starting with the COVID-19 crisis where we provided additional flexibility. We accelerated some of our disbursement recently to the exogenous shocks and the shock of increase in price of food and commodity. We had recently completed a review that provided Pakistan with $1.2 billion and hopefully we will be fielding a mission in November after the annual meetings to Pakistan in order to start with the authorities preparing for the next review.
We are waiting currently for the assessment of damages the World Bank and UNDP are conducting in order to see the repercussions on public finance and the impact on the economy and on the society.
Based on this assessment, he said, We will need to update our numbers and based on our discussion with the authorities, we will also listen to them to see what are their priorities, and how the Fund can help. Of course, on the issue of subsidy, as in other parts of the world, subsidy that is targeted to support certain items has proved not to be very effective. I would say it has proved to be very regressive. And in our regional economic outlook we are again looking at this issue that is showing that this is not the best way to use the very limited fiscal space that exists. Therefore, we are encouraging Pakistan as well as also other countries to move from an un-targeted subsidy that is a waste of resources and to dedicate those resources to those who need it.
The IMF official said, The region spends on social protection 2 percent of GDP and in certain cases what countries are spending on subsidies could be the double of that. Therefore, it s very important to use this moment where challenges are mounting, where increase in prices is hurting, to reallocate the resources for those who need it most. And this is something that it s not, I would say, part of the IMF conditionalities, this is part of what is needed in order to provide the right protection for those who need it at the time where inflation is very high.
He stated that since the outbreak of the Covid crisis, the IMF has supported both the Middle East and North Africa (MENA) and Caucasus and Central Asia (CCA), plus Afghanistan and Pakistan, with US$21.3 billion in financing. And, in addition, in 2021, it provided, through the SDR allocation, additional boost to reserves by US$49 billion.
Earlier, Federal Minister for Finance & Revenue Senator Ishaq Dar met International Monetary Fund s Deputy Managing Director (DMD) Antoinette Sayeh on Friday in Washington. He told her of the damages caused by the unprecedented floods in Pakistan, and shared with her the government s vision for stabilising the economy and carrying out sustainable and resilient recovery.
The DMD appreciated the government s policies and assured the minister of IMF s continued support to Pakistan. Ishaq Dar, in his meeting with World Bank President David Malpass, thanked the bank for its continued support to socio economic development of Pakistan. He thanked the World Bank for its assistance for rescue and relief operations in the aftermath of unprecedented devastating floods. President Malpass assured that the Bank would continue to work with Pakistan to help it overcome its socio-economic challenges due to the floods.
The finance minister, in a separate meeting with Martin Raiser, Vice President SAR, World Bank, thanked him for undertaking a visit to Pakistan to see firsthand the devastation caused by the floods. The vice president assured him that the bank would continue to support Pakistan in overcoming the economic difficulties that the country was facing.
The minister also met Dr Muhammad Sulaiman Al Jasser, President of the Islamic Development Bank (IDB). Dar thanked him for the IDB s continued engagement with Pakistan. He appreciated that Pakistan and the Bank had remained trusted partners for decades. President Al Jasser appreciated the measures being taken by GoP to stabilise the economy while providing relief to the flood victims.
The finance minister in his meeting with the leadership of Deutsche Bank and J P Morgan elaborated upon the government s vision to stabilise the economy, while also providing relief to the victims of flood. He assured that the GoP was committed to completing the IMF s programme. The delegation also met with rating agencies and participated in several events being held during the annual meetings.
The delegation also engaged at the Pakistan House with a diverse group of Pakistani professionals, including leading businessmen, tech entrepreneurs and others.
The finance minister is leading Pakistan s delegation in the IMF/World Bank s 2022 annual meetings being held in Washington DC. Other delegates include Sardar Ayaz Sadiq, Federal Minister for Economic Affairs, Dr Aisha Ghaus Pasha, Minister of State for Finance & Revenue, Jameel Ahmed, Governor State Bank of Pakistan, Hamed Yaqoob Sheikh, Finance Secretary, Dr Kazim Niaz, Secretary Economic Affairs Division, and Ali Tahir, Additional Secretary, Finance Division.
Meanwhile, a statement issued by the World Bank stated that WB reminded Pakistani officials to focus on the implementation of fiscal and energy reforms to stabilise the economy and lay the foundation for a sustained growth.
The Bank s President, David Malpass, emphasised to Pakistan s delegation, led by Finance Minister Ishaq Dar, the importance of predictable economic policies to restore macroeconomic stability and market confidence, according to the statement issued by the World Bank.
The World Bank statement said that President Malpass encouraged the government to focus on the implementation of Pakistan s fiscal and energy reforms to stabilise the economy and lay the foundation for a sustained growth.
The News PK
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Japan rolls over $172m loan
Pakistan signs deal with JICA under DSSI
ISLAMABAD:
Pakistan on Wednesday signed a debt service suspension agreement with the Japan International Cooperation Agency (JICA) for the deferment of payment of $172 million loans under the G-20 Debt Service Suspension Initiative (DSSI).
This amount, initially repayable between July and December, 2021, will now be repaid over a period of six years, including one-year grace period, in semi-annual instalments, said a press release issued by the Economic Affairs Ministry.
Due to the support extended by the development partners of Pakistan, the G-20 DSSI has provided the fiscal space, which was necessary to deal with the urgent health and economic needs of Pakistan, it said.
Express Tribune
Pakistan signs deal with JICA under DSSI
ISLAMABAD:
Pakistan on Wednesday signed a debt service suspension agreement with the Japan International Cooperation Agency (JICA) for the deferment of payment of $172 million loans under the G-20 Debt Service Suspension Initiative (DSSI).
This amount, initially repayable between July and December, 2021, will now be repaid over a period of six years, including one-year grace period, in semi-annual instalments, said a press release issued by the Economic Affairs Ministry.
Due to the support extended by the development partners of Pakistan, the G-20 DSSI has provided the fiscal space, which was necessary to deal with the urgent health and economic needs of Pakistan, it said.
Express Tribune
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$1.5bn ADB loan for Pakistan to be finalised today
The ADB’s Board is scheduled to hold a meeting on Friday (today) in Manila
ISLAMABAD: The Asian Development Bank (ADB) is all set to approve a $1.5 billion program loan for Pakistan on Friday (today) under Building Resilience with Active Countercyclical Expenditure (BRACE) programme.
The ADB’s Board is scheduled to hold a meeting on Friday (today) in Manila for considering the approval of $1.5 billion program loan for Pakistan. With the approval of this loan, it is expected that it will be disbursed next week, helping Islamabad to boost its dwindling foreign currency reserves. It is also expected that the Asian Infrastructure Investment Bank (AIIB) will also approve co-financing of $500 million, so the total disbursement will touch $2 billion within the ongoing month.
The foreign currency reserves held by the State Bank of Pakistan stood at $7.5 billion on October 14, 2022, in accordance with the official data released by the SBP on Thursday. Such a low level of reserves could hardly meet requirements of less than two months of import coverage.
Pakistan requires $34 billion in the current fiscal year keeping in view the external debt servicing requirement of $22.9 billion and current account deficit projection in the range of $10 to $12 billion. On the other side, the devastating floods compounded the woes of struggling economy. The consortium of international donors, including the World Bank, ADB, UNDP and EU estimated that Pakistan faced losses of $32.4 billion and it required $16.2 billion for construction costs.
According to an official document, the BRACE program loan of $1.5 billion will help Pakistan to support its response to the worsening macroeconomic crisis compounded by the Russian invasion of Ukraine and devastating floods that have affected nearly 33 million people. Pakistani authorities had kick-started working on this program loan prior to the recent floods. To mitigate the adverse impact of cumulative exogenous shocks, especially on the poor and vulnerable, the government’s countercyclical measures amount to nearly $2.4 billion.
The BRACE program will provide general budget support to the government which will help create fiscal space needed to finance its crisis response and relief measures and vulnerability and facilitate economic resilience to future shocks.
The government has agreed to strong governance measures to ensure sustainability and build capacity, including the establishment of a steering committee of stakeholders to oversee the implementation of relief and response measures; a government-led platform for monthly coordinated discussions on policy dialogue with development partners; submission of quarterly report to ADB and verification of selected disaster management framework indicator through independent survey under ADB technical assistance.
The News PK
The ADB’s Board is scheduled to hold a meeting on Friday (today) in Manila
ISLAMABAD: The Asian Development Bank (ADB) is all set to approve a $1.5 billion program loan for Pakistan on Friday (today) under Building Resilience with Active Countercyclical Expenditure (BRACE) programme.
The ADB’s Board is scheduled to hold a meeting on Friday (today) in Manila for considering the approval of $1.5 billion program loan for Pakistan. With the approval of this loan, it is expected that it will be disbursed next week, helping Islamabad to boost its dwindling foreign currency reserves. It is also expected that the Asian Infrastructure Investment Bank (AIIB) will also approve co-financing of $500 million, so the total disbursement will touch $2 billion within the ongoing month.
The foreign currency reserves held by the State Bank of Pakistan stood at $7.5 billion on October 14, 2022, in accordance with the official data released by the SBP on Thursday. Such a low level of reserves could hardly meet requirements of less than two months of import coverage.
Pakistan requires $34 billion in the current fiscal year keeping in view the external debt servicing requirement of $22.9 billion and current account deficit projection in the range of $10 to $12 billion. On the other side, the devastating floods compounded the woes of struggling economy. The consortium of international donors, including the World Bank, ADB, UNDP and EU estimated that Pakistan faced losses of $32.4 billion and it required $16.2 billion for construction costs.
According to an official document, the BRACE program loan of $1.5 billion will help Pakistan to support its response to the worsening macroeconomic crisis compounded by the Russian invasion of Ukraine and devastating floods that have affected nearly 33 million people. Pakistani authorities had kick-started working on this program loan prior to the recent floods. To mitigate the adverse impact of cumulative exogenous shocks, especially on the poor and vulnerable, the government’s countercyclical measures amount to nearly $2.4 billion.
The BRACE program will provide general budget support to the government which will help create fiscal space needed to finance its crisis response and relief measures and vulnerability and facilitate economic resilience to future shocks.
The government has agreed to strong governance measures to ensure sustainability and build capacity, including the establishment of a steering committee of stakeholders to oversee the implementation of relief and response measures; a government-led platform for monthly coordinated discussions on policy dialogue with development partners; submission of quarterly report to ADB and verification of selected disaster management framework indicator through independent survey under ADB technical assistance.
The News PK
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I heard the other day that the gov. is going to purchase oil from Russia now. What was the issue when IK wanted that? Has Uncle Sam given permission now?
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Pakistan seeks $6.3b China debt rollover
New proposal to seek fresh Chinese loan to repay maturing bilateral debt during FY 2022-23 also under consideration
ISLAMABAD:
Pakistan on Saturday requested China to rollover its $6.3 billion debt that is maturing in next eight months as part of its overall plan to arrange $34 billion in the current fiscal year to meet its debt and external trade-related obligations.
Another proposal was also under consideration to seek a fresh Chinese loan to repay the maturing bilateral debt during the fiscal year 2022-23, ending on June 30.
The issue of rollover and refinancing of nearly $6.3 billion commercial loans and the central bank debt was discussed in a meeting between Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar.
The $3.3 billion Chinese commercial loans and three $3 billion worth SAFE deposits loans were maturing from now till June next year, according to the Ministry of Finance officials.
The SAFE deposit is on the balance sheet of the central bank. In addition to this, over $900 million bilateral Chinese debt was becoming due during the current fiscal year.
For the current fiscal year, the International Monetary Fund and the Ministry of Finance have estimated Pakistan’s gross external financing requirements in the range of $32 billion to $34 billion, excluding the impact of the recent devastating floods.
Pakistan has already obtained $2.2 billion loans during July-September quarter while Saudi Arabia has also announced to rollover $3 billion debt maturing in December this year. The country still needs to arrange $29 billion and it is looking for minimum $6.3 billion to $7.2 billion rollovers from China in addition to any fresh lending.
Sources said that this time the government was seeking rollover of the $3 billion SAFE deposit for more than one year, preferably for three to five years. China has extended a total $4 billion in SAFE deposits and out of this $1 billion has already been rolled over in July this year.
Prime Minister Shehbaz Sharif is visiting Beijing on November 1 with a long list of new projects and requests to rollover the existing debt, considering sanctioning of new debt and preferential trade treatment for certain exportable goods.
Pakistan is under pressure from the western institutions and the governments to seek rollover of Chinese debt, currently standing at $26.7 billion including public and publicly guaranteed debt.
Chinese commercial loans cannot be rolled over but can be refinanced, which requires the government to first pay the maturing debt and then get it back. This consumes significant time, which in turn puts pressure on the foreign exchange reserves until the transaction is not reversed.
China had taken three months’ time in refinancing a $2.3 billion commercial loan that Pakistan paid back in March. Pakistan’s gross foreign exchange reserves currently stand at $7.5 billion.
“The Finance Minister also appreciated the support extended by the Chinese leadership for flood relief and refinancing of syndicate facilities of RMB 15 billion (US$ 2.24 billion) to Pakistan”, according to a statement issued by the Ministry of Finance after the meeting.
The statement suggests that both the sides discussed the issue of the commercial loans refinancing.
Fitch – the international credit rating agency – on Friday highlighted the contradictory debt rollover statements given by Pakistani policymakers.
“The previous finance minister said before resigning that Pakistan would seek debt relief from non-commercial creditors. Prime Minister Shehbaz Sharif also appealed for debt relief within the Paris Club framework. More recently, however, the Minister of Finance (Ishaq Dar) publicly ruled this out,” Fitch stated. It downgraded Pakistan to the highly risky debt category.
Dar took a right decision to withdraw the move of seeking Paris Club debt restructuring. The Paris Club debt rescheduling decision was unnerving the global markets.
The finance minister further highlighted the economic challenges and policies of the present government with the aim to bring about economic and fiscal stability, the finance ministry stated.
Sources said that both sides also discussed the issue of outstanding Chinese dues on account of payments to the Chinese Independent Power Producers for the cost of the electricity purchase.
Pakistan is expected to solve the lingering issue of opening a bank account to save the Chinese companies from the vicious cycle of circular debt before the PM’s visit.
The proposed visit of PM Shehbaz to China was also discussed in the meeting and both sides hoped that it would enhance bilateral relations between both the countries, the finance ministry said.
Dar assured his full support for the successful implementation of CPEC projects, according to the statement.
Rong reaffirmed the Chinese government’s continued support to Pakistan and thanked Islamabad for facilitating Chinese companies in various projects in Pakistan, it added.
He also assured full support and cooperation of the Chinese Government in developing Special Economic Zones as part of CPEC.
The issue of changing the design and scope of a much-delayed 300 megawatts Gwadar imported coal-fired power plant also came under discussion. Pakistan wants to shelve the plan due to the high cost of imported fuel and its preference for local resources.
The China Communications Construction Group (CCCG) had planned to set up the plant at a cost of $542 million. But diplomatic sources said that the Chinese government was not keen to either change the fuel to LNG or use Thar coal due its high cost.
Pakistan cannot make any unilateral change in the project and will have to place its decision before the JCC for endorsement, which makes strategic planning for CPEC.
The JCC meeting is scheduled to be held on October 27.
Express Tribune
New proposal to seek fresh Chinese loan to repay maturing bilateral debt during FY 2022-23 also under consideration
ISLAMABAD:
Pakistan on Saturday requested China to rollover its $6.3 billion debt that is maturing in next eight months as part of its overall plan to arrange $34 billion in the current fiscal year to meet its debt and external trade-related obligations.
Another proposal was also under consideration to seek a fresh Chinese loan to repay the maturing bilateral debt during the fiscal year 2022-23, ending on June 30.
The issue of rollover and refinancing of nearly $6.3 billion commercial loans and the central bank debt was discussed in a meeting between Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar.
The $3.3 billion Chinese commercial loans and three $3 billion worth SAFE deposits loans were maturing from now till June next year, according to the Ministry of Finance officials.
The SAFE deposit is on the balance sheet of the central bank. In addition to this, over $900 million bilateral Chinese debt was becoming due during the current fiscal year.
For the current fiscal year, the International Monetary Fund and the Ministry of Finance have estimated Pakistan’s gross external financing requirements in the range of $32 billion to $34 billion, excluding the impact of the recent devastating floods.
Pakistan has already obtained $2.2 billion loans during July-September quarter while Saudi Arabia has also announced to rollover $3 billion debt maturing in December this year. The country still needs to arrange $29 billion and it is looking for minimum $6.3 billion to $7.2 billion rollovers from China in addition to any fresh lending.
Sources said that this time the government was seeking rollover of the $3 billion SAFE deposit for more than one year, preferably for three to five years. China has extended a total $4 billion in SAFE deposits and out of this $1 billion has already been rolled over in July this year.
Prime Minister Shehbaz Sharif is visiting Beijing on November 1 with a long list of new projects and requests to rollover the existing debt, considering sanctioning of new debt and preferential trade treatment for certain exportable goods.
Pakistan is under pressure from the western institutions and the governments to seek rollover of Chinese debt, currently standing at $26.7 billion including public and publicly guaranteed debt.
Chinese commercial loans cannot be rolled over but can be refinanced, which requires the government to first pay the maturing debt and then get it back. This consumes significant time, which in turn puts pressure on the foreign exchange reserves until the transaction is not reversed.
China had taken three months’ time in refinancing a $2.3 billion commercial loan that Pakistan paid back in March. Pakistan’s gross foreign exchange reserves currently stand at $7.5 billion.
“The Finance Minister also appreciated the support extended by the Chinese leadership for flood relief and refinancing of syndicate facilities of RMB 15 billion (US$ 2.24 billion) to Pakistan”, according to a statement issued by the Ministry of Finance after the meeting.
The statement suggests that both the sides discussed the issue of the commercial loans refinancing.
Fitch – the international credit rating agency – on Friday highlighted the contradictory debt rollover statements given by Pakistani policymakers.
“The previous finance minister said before resigning that Pakistan would seek debt relief from non-commercial creditors. Prime Minister Shehbaz Sharif also appealed for debt relief within the Paris Club framework. More recently, however, the Minister of Finance (Ishaq Dar) publicly ruled this out,” Fitch stated. It downgraded Pakistan to the highly risky debt category.
Dar took a right decision to withdraw the move of seeking Paris Club debt restructuring. The Paris Club debt rescheduling decision was unnerving the global markets.
The finance minister further highlighted the economic challenges and policies of the present government with the aim to bring about economic and fiscal stability, the finance ministry stated.
Sources said that both sides also discussed the issue of outstanding Chinese dues on account of payments to the Chinese Independent Power Producers for the cost of the electricity purchase.
Pakistan is expected to solve the lingering issue of opening a bank account to save the Chinese companies from the vicious cycle of circular debt before the PM’s visit.
The proposed visit of PM Shehbaz to China was also discussed in the meeting and both sides hoped that it would enhance bilateral relations between both the countries, the finance ministry said.
Dar assured his full support for the successful implementation of CPEC projects, according to the statement.
Rong reaffirmed the Chinese government’s continued support to Pakistan and thanked Islamabad for facilitating Chinese companies in various projects in Pakistan, it added.
He also assured full support and cooperation of the Chinese Government in developing Special Economic Zones as part of CPEC.
The issue of changing the design and scope of a much-delayed 300 megawatts Gwadar imported coal-fired power plant also came under discussion. Pakistan wants to shelve the plan due to the high cost of imported fuel and its preference for local resources.
The China Communications Construction Group (CCCG) had planned to set up the plant at a cost of $542 million. But diplomatic sources said that the Chinese government was not keen to either change the fuel to LNG or use Thar coal due its high cost.
Pakistan cannot make any unilateral change in the project and will have to place its decision before the JCC for endorsement, which makes strategic planning for CPEC.
The JCC meeting is scheduled to be held on October 27.
Express Tribune
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IMF presses Pakistan to foist more taxes
Demand comes amid fears tax-to-GDP ratio would fall short even if FBR achieves annual target
ISLAMABAD:
Despite healthy momentum in the revenue generation, the International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs600 billion in additional taxes and again urged Islamabad to set up an anti-corruption task force.
However, the authorities concerned have yet to accept the demand of imposing more taxes amid pinching high double-digit inflation – one of the leading factors behind evaporating political fortunes of the ruling alliance in the political capital and the opposition’s popularity.
The demands were put forth before the Pakistani authorities by IMF Mission Chief to Pakistan Nathan Porter along with half a dozen other conditions during recent interactions in Washington, according to government sources.
The matter will be discussed during the next round of the programme review talks that are expected to take place in November, sources told The Express Tribune.
The IMF is of the view that due to inflation-induced nearly 25% nominal growth of the economy in the current fiscal year, the tax-to-GDP ratio would fall below the agreed level even if the FBR achieves its annual target of Rs7.470 trillion, according to the sources.
At the time of the budget, the government had estimated the size of the GDP at Rs78 trillion on the basis of an average inflation rate of 11.5% and an economic growth rate of 5%. The Rs7.470 trillion annual tax target is equal to nearly 9.6% of the GDP.
However, due to various administrative measures, rupee devaluation, floods and food supply shocks, the average inflation is now estimated at 23% and the GDP growth rate is around 2%. After a spike in inflation, the projected size of the GDP for the current fiscal year is estimated at Rs83 trillion.
This would bring down the tax-to-GDP ratio to around 8.9% despite hitting the Rs7.470 trillion annual target by the FBR.
In order to stick to the macroeconomic framework targets, the IMF has estimated that Pakistan may have to take additional revenue measures equal to 0.75% of the GDP, which translates into over Rs600 billion, according to the sources.
The government has set the annual tax collection target of the FBR at Rs7.470 trillion, which requires a 22% growth rate over the last year’s collection. The FBR has collected over Rs1.61 trillion during the first quarter, surpassing its target by over Rs26 billion. But the growth rate in the collection was 17%, significantly lower than the prevailing inflation rate.
“The FBR is not considering any proposal to impose more taxes,” said Afaque Qureshi, a member of Inland Revenue Policy and the spokesman.
It is highly unlikely that the Pakistan Democratic Movement’s coalition government will accept such a demand. The main alliance party, the PML-N, has already taken the worst hit on its vote bank and popularity due to the increasing cost of living.
The sources said that one of the options that the IMF gave was to impose a sales tax on petroleum products but the Finance Minister Ishaq Dar did not accept any tax-specific recommendation of the IMF.
The government is currently charging Rs47.50 per litre petroleum levy tax on petrol and around Rs7.58 per litre on diesel. The IMF has also asked the government to keep adhering to the plan agreed upon for imposing the petroleum levy, which warrants Rs50 per litre levy on petrol in January 2023 and Rs50 per diesel till March 2023.
The government is already close to the maximum threshold on petrol but it is now required to start increasing taxes on diesel from next month to remain on track.
The sources said that the IMF has also urged Pakistan to notify an anti-corruption task force, which the government had agreed to in June this year.
According to the agreement, by January 2023 Pakistan will publish a comprehensive review of the anti-corruption institutional framework, mainly the National Accountability Bureau (NAB) -- by a task force with the participation of independent experts with international experience and civil society organisations.
The task force will also recommend as appropriate structural reform measures that strengthen the independence of anti-graft institutions, prevent political influence and persecution, and provide for transparency and accountability controls against abuse, according to the deal.
The sources said that before joining of the Finance Minister Ishaq Dar, the name of former Prime Minister Shahid Khaqan Abbasi was proposed to head the task force. But no decision had been taken.
“Shahid Khaqan Abbasi’s name had been proposed to head the task force but my view was that an international expert with a strong legal background, preferably from New Zealand or Singapore should head the body,” said Miftah Ismail, former Finance Minister. These countries are considered to have a very low prevalence of corruption in society.
Express Tribune
Demand comes amid fears tax-to-GDP ratio would fall short even if FBR achieves annual target
ISLAMABAD:
Despite healthy momentum in the revenue generation, the International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs600 billion in additional taxes and again urged Islamabad to set up an anti-corruption task force.
However, the authorities concerned have yet to accept the demand of imposing more taxes amid pinching high double-digit inflation – one of the leading factors behind evaporating political fortunes of the ruling alliance in the political capital and the opposition’s popularity.
The demands were put forth before the Pakistani authorities by IMF Mission Chief to Pakistan Nathan Porter along with half a dozen other conditions during recent interactions in Washington, according to government sources.
The matter will be discussed during the next round of the programme review talks that are expected to take place in November, sources told The Express Tribune.
The IMF is of the view that due to inflation-induced nearly 25% nominal growth of the economy in the current fiscal year, the tax-to-GDP ratio would fall below the agreed level even if the FBR achieves its annual target of Rs7.470 trillion, according to the sources.
At the time of the budget, the government had estimated the size of the GDP at Rs78 trillion on the basis of an average inflation rate of 11.5% and an economic growth rate of 5%. The Rs7.470 trillion annual tax target is equal to nearly 9.6% of the GDP.
However, due to various administrative measures, rupee devaluation, floods and food supply shocks, the average inflation is now estimated at 23% and the GDP growth rate is around 2%. After a spike in inflation, the projected size of the GDP for the current fiscal year is estimated at Rs83 trillion.
This would bring down the tax-to-GDP ratio to around 8.9% despite hitting the Rs7.470 trillion annual target by the FBR.
In order to stick to the macroeconomic framework targets, the IMF has estimated that Pakistan may have to take additional revenue measures equal to 0.75% of the GDP, which translates into over Rs600 billion, according to the sources.
The government has set the annual tax collection target of the FBR at Rs7.470 trillion, which requires a 22% growth rate over the last year’s collection. The FBR has collected over Rs1.61 trillion during the first quarter, surpassing its target by over Rs26 billion. But the growth rate in the collection was 17%, significantly lower than the prevailing inflation rate.
“The FBR is not considering any proposal to impose more taxes,” said Afaque Qureshi, a member of Inland Revenue Policy and the spokesman.
It is highly unlikely that the Pakistan Democratic Movement’s coalition government will accept such a demand. The main alliance party, the PML-N, has already taken the worst hit on its vote bank and popularity due to the increasing cost of living.
The sources said that one of the options that the IMF gave was to impose a sales tax on petroleum products but the Finance Minister Ishaq Dar did not accept any tax-specific recommendation of the IMF.
The government is currently charging Rs47.50 per litre petroleum levy tax on petrol and around Rs7.58 per litre on diesel. The IMF has also asked the government to keep adhering to the plan agreed upon for imposing the petroleum levy, which warrants Rs50 per litre levy on petrol in January 2023 and Rs50 per diesel till March 2023.
The government is already close to the maximum threshold on petrol but it is now required to start increasing taxes on diesel from next month to remain on track.
The sources said that the IMF has also urged Pakistan to notify an anti-corruption task force, which the government had agreed to in June this year.
According to the agreement, by January 2023 Pakistan will publish a comprehensive review of the anti-corruption institutional framework, mainly the National Accountability Bureau (NAB) -- by a task force with the participation of independent experts with international experience and civil society organisations.
The task force will also recommend as appropriate structural reform measures that strengthen the independence of anti-graft institutions, prevent political influence and persecution, and provide for transparency and accountability controls against abuse, according to the deal.
The sources said that before joining of the Finance Minister Ishaq Dar, the name of former Prime Minister Shahid Khaqan Abbasi was proposed to head the task force. But no decision had been taken.
“Shahid Khaqan Abbasi’s name had been proposed to head the task force but my view was that an international expert with a strong legal background, preferably from New Zealand or Singapore should head the body,” said Miftah Ismail, former Finance Minister. These countries are considered to have a very low prevalence of corruption in society.
Express Tribune
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Pakistan owes creditors Rs49,200 billion, says Dar
Finance Minister briefs NA as public debt jumps over 10 trillion in just one year
ISLAMABAD:
The total volume of debt on Pakistan has risen to Rs49,200 billion, the National Assembly was informed on Monday.
Finance Minister Ishaq Dar said that on June 30, 2022 the domestic debt on the country was Rs31,000 billion while the external debt amounted to Rs18,160 billion.
Earlier, a report of the finance ministry revealed that the country’s external debt sustainability indicators further worsened in the last fiscal year due to more reliance on short-term foreign loans and exposing the government to risks related to refinancing and rupee depreciation.
According to the Annual Debt Review and Public Debt Bulletin for fiscal year 2021-22, the public debt indicators pertaining to debt maturity, currency risks, refinancing risks and interest rate risks had deteriorated.
The report reflected poorly on the performance of the Public Debt Management Office and the federal government. The total public debt jumped from Rs39.9 trillion to Rs49.2 trillion within a year, an unsustainable increase of Rs9.3 trillion.
The finance ministry said that the Rs3.8 trillion worth of increase was due to currency depreciation as the exchange rate slipped from Rs157.3 to a dollar in June 2021 to Rs204.4 in June 2022. The rest of the increase was due to budget financing needs.
The share of external debt in the total public debt increased from 34% in 2020-21 to 37% in the last fiscal year, according to the report. It was heading towards the maximum limit of 40%.
Express Tribune
Finance Minister briefs NA as public debt jumps over 10 trillion in just one year
ISLAMABAD:
The total volume of debt on Pakistan has risen to Rs49,200 billion, the National Assembly was informed on Monday.
Finance Minister Ishaq Dar said that on June 30, 2022 the domestic debt on the country was Rs31,000 billion while the external debt amounted to Rs18,160 billion.
Earlier, a report of the finance ministry revealed that the country’s external debt sustainability indicators further worsened in the last fiscal year due to more reliance on short-term foreign loans and exposing the government to risks related to refinancing and rupee depreciation.
According to the Annual Debt Review and Public Debt Bulletin for fiscal year 2021-22, the public debt indicators pertaining to debt maturity, currency risks, refinancing risks and interest rate risks had deteriorated.
The report reflected poorly on the performance of the Public Debt Management Office and the federal government. The total public debt jumped from Rs39.9 trillion to Rs49.2 trillion within a year, an unsustainable increase of Rs9.3 trillion.
The finance ministry said that the Rs3.8 trillion worth of increase was due to currency depreciation as the exchange rate slipped from Rs157.3 to a dollar in June 2021 to Rs204.4 in June 2022. The rest of the increase was due to budget financing needs.
The share of external debt in the total public debt increased from 34% in 2020-21 to 37% in the last fiscal year, according to the report. It was heading towards the maximum limit of 40%.
Express Tribune
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CHINA, SAUDI ARABIA TO PROVIDE $13BN PACKAGE TO PAKISTAN: DAR
ISLAMABAD: China and Saudi Arabia have assured Pakistan of providing a financial package of $13 billion, Finance Minister Ishaq Dar told journalists Saturday.
Talking to journalists, Ishaq Dar said that during Prime Minister Shehbaz Sharif recent visit to Beijing, the Chinese leadership promised to roll over $4bn in sovereign loans, refinance $3.3bn commercial bank loans and increase currency swap by about $1.45bn — from 30bn yuan to 40bn yuan.
“China and Saudi Arabia have given assurances to Pakistani delegations under Prime Minister Shehbaz Sharif during recent visits that they will take care of Islamabad’s financial requirements till June 2023,” he said.
Dar further said the Chinese side had also agreed to fast-track the ML-1 (Main Line-1) project from Karachi to Peshawar.
The finance minister further said the Karachi Circular Railway (KCR) and Hyderabad-Karachi motorway projects were also taken up during the meeting and the KCR would soon be in the implementation phase.
Responding to another question, Ishaq Dar said Saudi Arabia had also given a positive response to Pakistan’s request for increasing its financing by another $3bn to $6bn and doubling its deferred oil facility of $1.2bn.
He further said that Saudi Arabia would also construct a Petrochemical Complex in Gwadar at an estimated investment of $11 to $12 billion.
ARY
ISLAMABAD: China and Saudi Arabia have assured Pakistan of providing a financial package of $13 billion, Finance Minister Ishaq Dar told journalists Saturday.
Talking to journalists, Ishaq Dar said that during Prime Minister Shehbaz Sharif recent visit to Beijing, the Chinese leadership promised to roll over $4bn in sovereign loans, refinance $3.3bn commercial bank loans and increase currency swap by about $1.45bn — from 30bn yuan to 40bn yuan.
“China and Saudi Arabia have given assurances to Pakistani delegations under Prime Minister Shehbaz Sharif during recent visits that they will take care of Islamabad’s financial requirements till June 2023,” he said.
Dar further said the Chinese side had also agreed to fast-track the ML-1 (Main Line-1) project from Karachi to Peshawar.
The finance minister further said the Karachi Circular Railway (KCR) and Hyderabad-Karachi motorway projects were also taken up during the meeting and the KCR would soon be in the implementation phase.
Responding to another question, Ishaq Dar said Saudi Arabia had also given a positive response to Pakistan’s request for increasing its financing by another $3bn to $6bn and doubling its deferred oil facility of $1.2bn.
He further said that Saudi Arabia would also construct a Petrochemical Complex in Gwadar at an estimated investment of $11 to $12 billion.
ARY
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Govt shares revised budget framework with IMF
Figure shows negative impact of hardly Rs55b on revenues
ISLAMABAD:
Despite the worst flood in the country‘s history and hundreds of billions of rupees in unbudgeted subsidies, Pakistan has initially projected only Rs990 billion fiscal slippages in this financial year, hardly showing a negative impact of Rs55 billion on its revenues.
Sources told The Express Tribune that Pakistan has shared the revised budget framework with the International Monetary Fund (IMF) amid the global lender’s apprehensions about the reliability of these figures.
The disagreement over the impact of the floods on the fiscal framework remains a key hurdle in the next visit by the IMF Mission to Pakistan for negotiations for the release of a $1.2 billion loan tranche.
The sources said that the discussions would take place on these numbers with the IMF and the government was open to revise the figures based on the input by the global lender.
They said the government had projected only Rs990 billion fiscal slippages -- of which Rs850 billion was only on account of higher debt servicing cost.
The overall budget deficit that the National Assembly had approved at Rs3.8 trillion was now projected at nearly Rs4.8 trillion, they added.
Despite the country witnessing the worst floods in its history, the coalition government has been signing off billions of rupees of unbudgeted cheques for exporters and farmers.
It also waived off Rs40 billion in revenue in favour of traders.
However, it has not shown any major slippage on account of non-interest expenses and tax revenues, turning the figures unrealistic.
The Federal Board of Revenue’s (FBR) collection projection has been kept unchanged.
The sources said almost the entire shock of Rs990 billion had been shown on the expenditures, with hardly Rs55 billion negative impact on the petroleum levy target.
Neither the finance ministry, nor the IMF resident representative responded to the requests for comments.
However, a government functionary said, off the record, that in the present circumstances the government would still have a primary budget surplus.
The primary budget surplus is calculated after excluding the interest payments.
There is a view that the government has overstated the interest expenses to Rs4.8 trillion up from Rs3.95 trillion approved in the budget.
The government has gone ahead with this move as the IMF does not trail the interest expense under its $6.5 billion programme.
The cushion availed on account of higher than the targeted interest expenses can be utilised to meet some other expenditures, said the sources.
However, the senior government functionary said that the interest expenses were bound to rise because of the 15% policy rate.
The sources said the government had told the IMF that there would be a primary budget surplus of Rs14 billion or 0.02% of the GDP as against the budgeted figure of Rs153 billion.
However, this assessment is contrary to the World Bank report that showed Pakistan’s primary deficit at 3% of the GDP.
The sources said the government had projected the total expenditures, inclusive of the provinces, at Rs15.1 trillion -- up by Rs934 billion.
They added that the current expenses were shown at Rs9.7 trillion -- up by Rs1.1 trillion.
However, the interest expenses are projected to be increased from Rs3.95 trillion to Rs4.8 trillion -- an excess spending of 21.5%.
The subsidies are the second component where the government has estimated a slippage of Rs240 billion -- up from Rs664 billion to Rs906 billion -- an excess of 36%.
Out of this Rs240 billion, Rs195 billion would be taken out of the annual provision for emergencies, said the sources.
The pension is the third current expenditure head where the annual cost has been projected to increase by Rs25 billion to Rs634 billion.
The federal development expenditures have been slashed by Rs175 billion to Rs469 billion, according to the sources.
The reset of the expenses have been kept unchanged.
The major assumptions are made in the revenue collection, where the FBR's target has been kept unchanged at Rs7.47 trillion despite the board informing the finance ministry that the half-year target could be missed by a margin of Rs150 billion.
The petroleum levy collection is projected at Rs855 billion despite a mere Rs47 billion collection during the first three months of the current fiscal year.
The government is hopeful that it will collect at least Rs400 billion petroleum levy on account of petrol alone in the remainder period of the current fiscal year at the current rates.
The State Bank profit is projected at Rs371 billion -- Rs71 billion higher than budgeted estimates.
The rest of the revenue estimates have been kept unchanged.
The federal budget deficit widened by 43% to over Rs1 trillion in the first quarter of the current fiscal year as the rise in expenditure more than doubled the pace of gross revenues because of the uncontrolled spending on debt servicing.
Express Tribune
Figure shows negative impact of hardly Rs55b on revenues
ISLAMABAD:
Despite the worst flood in the country‘s history and hundreds of billions of rupees in unbudgeted subsidies, Pakistan has initially projected only Rs990 billion fiscal slippages in this financial year, hardly showing a negative impact of Rs55 billion on its revenues.
Sources told The Express Tribune that Pakistan has shared the revised budget framework with the International Monetary Fund (IMF) amid the global lender’s apprehensions about the reliability of these figures.
The disagreement over the impact of the floods on the fiscal framework remains a key hurdle in the next visit by the IMF Mission to Pakistan for negotiations for the release of a $1.2 billion loan tranche.
The sources said that the discussions would take place on these numbers with the IMF and the government was open to revise the figures based on the input by the global lender.
They said the government had projected only Rs990 billion fiscal slippages -- of which Rs850 billion was only on account of higher debt servicing cost.
The overall budget deficit that the National Assembly had approved at Rs3.8 trillion was now projected at nearly Rs4.8 trillion, they added.
Despite the country witnessing the worst floods in its history, the coalition government has been signing off billions of rupees of unbudgeted cheques for exporters and farmers.
It also waived off Rs40 billion in revenue in favour of traders.
However, it has not shown any major slippage on account of non-interest expenses and tax revenues, turning the figures unrealistic.
The Federal Board of Revenue’s (FBR) collection projection has been kept unchanged.
The sources said almost the entire shock of Rs990 billion had been shown on the expenditures, with hardly Rs55 billion negative impact on the petroleum levy target.
Neither the finance ministry, nor the IMF resident representative responded to the requests for comments.
However, a government functionary said, off the record, that in the present circumstances the government would still have a primary budget surplus.
The primary budget surplus is calculated after excluding the interest payments.
There is a view that the government has overstated the interest expenses to Rs4.8 trillion up from Rs3.95 trillion approved in the budget.
The government has gone ahead with this move as the IMF does not trail the interest expense under its $6.5 billion programme.
The cushion availed on account of higher than the targeted interest expenses can be utilised to meet some other expenditures, said the sources.
However, the senior government functionary said that the interest expenses were bound to rise because of the 15% policy rate.
The sources said the government had told the IMF that there would be a primary budget surplus of Rs14 billion or 0.02% of the GDP as against the budgeted figure of Rs153 billion.
However, this assessment is contrary to the World Bank report that showed Pakistan’s primary deficit at 3% of the GDP.
The sources said the government had projected the total expenditures, inclusive of the provinces, at Rs15.1 trillion -- up by Rs934 billion.
They added that the current expenses were shown at Rs9.7 trillion -- up by Rs1.1 trillion.
However, the interest expenses are projected to be increased from Rs3.95 trillion to Rs4.8 trillion -- an excess spending of 21.5%.
The subsidies are the second component where the government has estimated a slippage of Rs240 billion -- up from Rs664 billion to Rs906 billion -- an excess of 36%.
Out of this Rs240 billion, Rs195 billion would be taken out of the annual provision for emergencies, said the sources.
The pension is the third current expenditure head where the annual cost has been projected to increase by Rs25 billion to Rs634 billion.
The federal development expenditures have been slashed by Rs175 billion to Rs469 billion, according to the sources.
The reset of the expenses have been kept unchanged.
The major assumptions are made in the revenue collection, where the FBR's target has been kept unchanged at Rs7.47 trillion despite the board informing the finance ministry that the half-year target could be missed by a margin of Rs150 billion.
The petroleum levy collection is projected at Rs855 billion despite a mere Rs47 billion collection during the first three months of the current fiscal year.
The government is hopeful that it will collect at least Rs400 billion petroleum levy on account of petrol alone in the remainder period of the current fiscal year at the current rates.
The State Bank profit is projected at Rs371 billion -- Rs71 billion higher than budgeted estimates.
The rest of the revenue estimates have been kept unchanged.
The federal budget deficit widened by 43% to over Rs1 trillion in the first quarter of the current fiscal year as the rise in expenditure more than doubled the pace of gross revenues because of the uncontrolled spending on debt servicing.
Express Tribune
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Flood recovery plan key to continued financial support for Pakistan: IMF
Pakistan’s timely finalisation of a recovery plan from devastating floods is essential to support discussions and continued financial support from multilateral and bilateral partners, the International Monetary Fund (IMF) said on Wednesday.
Pakistan was already battling a full-blown economic crisis, with decades-high inflation and dwindling foreign exchange reserves, when it was hit by floods earlier this year. It had entered a $6 billion IMF bailout programme in 2019, and the ninth review is currently pending.
“The timely finalisation of the recovery plan is essential to support the discussions, along with continuing financial support from multilateral and bilateral partners,” IMF’s resident representative in Islamabad, Esther Perez Ruiz, said in a message to Reuters.
She added that IMF staff is continuing discussions with authorities over policies to reprioritise and better target support towards humanitarian needs, while accelerating reform efforts to preserve economic and fiscal sustainability.
Devastating floods killed more than 1,700 people and inflicted billions of dollars of damage. The government’s estimates of the damage have varied from $10-40bn.
The finance ministry said last week that it would “expeditiously” finish technical engagement with the IMF as part of the ninth review of the programme, but a firm date for the review completion is yet to be announced.
The funds will be a lifeline for Pakistan, which is struggling to convince international markets and ratings agencies that it has the funds to meet external financing requirements, including debt repayments.
Pakistan has a $1bn international bond repayment due early next month. The State Bank of Pakistan’s foreign reserves stood at $7.9bn as of last week.
DAWN
Pakistan’s timely finalisation of a recovery plan from devastating floods is essential to support discussions and continued financial support from multilateral and bilateral partners, the International Monetary Fund (IMF) said on Wednesday.
Pakistan was already battling a full-blown economic crisis, with decades-high inflation and dwindling foreign exchange reserves, when it was hit by floods earlier this year. It had entered a $6 billion IMF bailout programme in 2019, and the ninth review is currently pending.
“The timely finalisation of the recovery plan is essential to support the discussions, along with continuing financial support from multilateral and bilateral partners,” IMF’s resident representative in Islamabad, Esther Perez Ruiz, said in a message to Reuters.
She added that IMF staff is continuing discussions with authorities over policies to reprioritise and better target support towards humanitarian needs, while accelerating reform efforts to preserve economic and fiscal sustainability.
Devastating floods killed more than 1,700 people and inflicted billions of dollars of damage. The government’s estimates of the damage have varied from $10-40bn.
The finance ministry said last week that it would “expeditiously” finish technical engagement with the IMF as part of the ninth review of the programme, but a firm date for the review completion is yet to be announced.
The funds will be a lifeline for Pakistan, which is struggling to convince international markets and ratings agencies that it has the funds to meet external financing requirements, including debt repayments.
Pakistan has a $1bn international bond repayment due early next month. The State Bank of Pakistan’s foreign reserves stood at $7.9bn as of last week.
DAWN
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Govt struggles for $1.18bn tranche
ISLAMABAD: Amid time running out, the International Monetary Fund (IMF) is still analysing Pakistan’s fiscal position particularly the flood-related expenditures that it viewed had changed the macroeconomic assumptions of the fund programme.
The “IMF understands that the floods have changed the macroeconomic assumptions on which the programme was designed; therefore detailed analysis is being conducted by their team using the data provided”, the Ministry of Finance said in response to a media query on delay in 9th review.
The two sides had been virtually engaged for more than a month now in attempts to conclude the 9th review this month so that the next tranche of about $1.18 billion could be approved by the IMF’s executive board and disbursed before Xmas and new year holidays. The policy level discussions are yet to be finalised although the finance ministry said the “IMF team is expected to visit Islamabad soon for completion of the 9th review”.
Under the normal mechanism, the fund staff mission has to reach an agreement with authorities on programme implementation and then required at least a fortnight for the board members to hold a meeting based on staff agreement. A further delay would mean the unavailability of the IMF executive board until the first week of January.
Pakistan’s foreign exchange reserves in the meanwhile are critically low and the central bank authorities have been rationing dollar releases even for essential imports like crude and petroleum products.
Finance Minister Ishaq Dar and the State Bank of Pakistan have already announced to repay $1bn Sukuk (Islamic bonds) later this week, ahead of Dec 5 maturity. As of Nov 18, reserves held by the central bank stood at $7.8bn. The oil companies and Petroleum division have been complaining about the shortage of foreign exchange and warning about supply disruptions.
The authorities shared last week a revised fiscal framework with the fund showing close to Rs1tr in fiscal slippages during the current fiscal year including over Rs900bn worth of higher than budgeted interest payments besides revenue shortcomings going forward.
While Pakistan would be seeking a few waivers on slippages from the fund programme because of floods, the fund staff had been examining the government’s position on flood-related expenditure on budget and related financing flows from multilateral and bilateral lenders and donors. Fund sources also suggest that two sides were remotely engaged “over policies to reprioritize and better target support toward humanitarian and rehabilitation needs, while also accelerating reform efforts to preserve macroeconomic and fiscal sustainability, including with continuing financial support from multilateral and bilateral partners”.
The policy level talks were originally due in the last week of October, rescheduled to Nov 3 and then kept on delaying following gaps in estimates by two sides. The authorities had been struggling to schedule formal talks on the overdue 9th review of the $7bn Extended Fund Facility amid a lack of clarity on flood-related financial requirements for the current fiscal year and declining revenue stream following import control as expenditures already go south.
Last week, the finance ministry said that the two sides had agreed that expenditure estimates for flood-related humanitarian assistance during the current year will be firmed up along with estimates of priority rehabilitation expenditure and claimed that the IMF indicated its willingness to sympathetically view the targeted assistance for poor and vulnerable, especially the flood hit.
DAWN
ISLAMABAD: Amid time running out, the International Monetary Fund (IMF) is still analysing Pakistan’s fiscal position particularly the flood-related expenditures that it viewed had changed the macroeconomic assumptions of the fund programme.
The “IMF understands that the floods have changed the macroeconomic assumptions on which the programme was designed; therefore detailed analysis is being conducted by their team using the data provided”, the Ministry of Finance said in response to a media query on delay in 9th review.
The two sides had been virtually engaged for more than a month now in attempts to conclude the 9th review this month so that the next tranche of about $1.18 billion could be approved by the IMF’s executive board and disbursed before Xmas and new year holidays. The policy level discussions are yet to be finalised although the finance ministry said the “IMF team is expected to visit Islamabad soon for completion of the 9th review”.
Under the normal mechanism, the fund staff mission has to reach an agreement with authorities on programme implementation and then required at least a fortnight for the board members to hold a meeting based on staff agreement. A further delay would mean the unavailability of the IMF executive board until the first week of January.
Pakistan’s foreign exchange reserves in the meanwhile are critically low and the central bank authorities have been rationing dollar releases even for essential imports like crude and petroleum products.
Finance Minister Ishaq Dar and the State Bank of Pakistan have already announced to repay $1bn Sukuk (Islamic bonds) later this week, ahead of Dec 5 maturity. As of Nov 18, reserves held by the central bank stood at $7.8bn. The oil companies and Petroleum division have been complaining about the shortage of foreign exchange and warning about supply disruptions.
The authorities shared last week a revised fiscal framework with the fund showing close to Rs1tr in fiscal slippages during the current fiscal year including over Rs900bn worth of higher than budgeted interest payments besides revenue shortcomings going forward.
While Pakistan would be seeking a few waivers on slippages from the fund programme because of floods, the fund staff had been examining the government’s position on flood-related expenditure on budget and related financing flows from multilateral and bilateral lenders and donors. Fund sources also suggest that two sides were remotely engaged “over policies to reprioritize and better target support toward humanitarian and rehabilitation needs, while also accelerating reform efforts to preserve macroeconomic and fiscal sustainability, including with continuing financial support from multilateral and bilateral partners”.
The policy level talks were originally due in the last week of October, rescheduled to Nov 3 and then kept on delaying following gaps in estimates by two sides. The authorities had been struggling to schedule formal talks on the overdue 9th review of the $7bn Extended Fund Facility amid a lack of clarity on flood-related financial requirements for the current fiscal year and declining revenue stream following import control as expenditures already go south.
Last week, the finance ministry said that the two sides had agreed that expenditure estimates for flood-related humanitarian assistance during the current year will be firmed up along with estimates of priority rehabilitation expenditure and claimed that the IMF indicated its willingness to sympathetically view the targeted assistance for poor and vulnerable, especially the flood hit.
DAWN
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<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Govt of Pakistan has today received US$ 500 million from Asian Infrastructure Investment Bank (AIIB). The funds are deposited with SBP and will augment our reserves. <a href="https://twitter.com/AIIB_Official?ref_src=twsrc%5Etfw">@AIIB_Official</a> <a href="https://twitter.com/StateBank_Pak?ref_src=twsrc%5Etfw">@StateBank_Pak</a> <a href="https://twitter.com/MIshaqDar50?ref_src=twsrc%5Etfw">@MIshaqDar50</a></p>— Ministry of Finance (@FinMinistryPak) <a href="https://twitter.com/FinMinistryPak/status/1597490468144975872?ref_src=twsrc%5Etfw">November 29, 2022</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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I hope there is a default,
because the zombie walk Pakistan finance is doing right now is not sustainable. The country is living way beyond its means, and is simply focussed on jumping from one creditor to the next. The first priority of any new government in power is to do a 'Please help me' world tour! When will this stop?
Pakistanis are convinced all the fortunes are being stolen by two families, the facts couldn't be farther from the truth. Yes, while these people did steal, we aren't talking about Ferdinand Marcos or Suharto here. Most of Pakistan's outgoings evaporate in servicing debt, inefficiencies, bureaucracy and improper budget allocation. Only a miniscule of this money is spent on the welfare of the people, while they continue to undeservedly bear the cross of the nation's burgeoning debt.
Every new loan tranche is a cause for celebration apparently, even the PSE celebrates this 'achievement'! Why, who benefits from this vicious circle?
The hardships of a default will be nothing new for the populace, they're suffering as it is. What it will do is choke the non-stop borrowing nature of policymakers and enforce them to take a long hard look at the decisions they're making.
because the zombie walk Pakistan finance is doing right now is not sustainable. The country is living way beyond its means, and is simply focussed on jumping from one creditor to the next. The first priority of any new government in power is to do a 'Please help me' world tour! When will this stop?
Pakistanis are convinced all the fortunes are being stolen by two families, the facts couldn't be farther from the truth. Yes, while these people did steal, we aren't talking about Ferdinand Marcos or Suharto here. Most of Pakistan's outgoings evaporate in servicing debt, inefficiencies, bureaucracy and improper budget allocation. Only a miniscule of this money is spent on the welfare of the people, while they continue to undeservedly bear the cross of the nation's burgeoning debt.
Every new loan tranche is a cause for celebration apparently, even the PSE celebrates this 'achievement'! Why, who benefits from this vicious circle?
The hardships of a default will be nothing new for the populace, they're suffering as it is. What it will do is choke the non-stop borrowing nature of policymakers and enforce them to take a long hard look at the decisions they're making.
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SBP repays $1bn bond
ISLAMABAD: Pakistan repaid a $1 billion international bond, the central bank spokesman said on Friday, amidst growing uncertainty about the country’s ability to meet external financing obligations.
The country’s economy has been beset by multiple crises, including the fallout of devastating floods that killed 1,700 people, low foreign exchange reserves and decades-high inflation.
“The payment (was) made to Citibank New York,” State Bank of Pakistan (SBP) spokesman Abid Qamar told Reuters in a message.
The notes climbed to 98.9 cents to the dollar on Friday, “marking a nearly 16-cent comeback from a record low of 83 cents in October”, Bloomberg reported, citing its indicative pricing data.
The bond repayment, which matures on Dec 5, totals $1.08bn, the central bank chief said last week.
During the week ended Nov 25, SBP reserves stood at $7,498.7 million. It has since received $500m from the Asian Infrastructure Investment Bank.
DAWN
ISLAMABAD: Pakistan repaid a $1 billion international bond, the central bank spokesman said on Friday, amidst growing uncertainty about the country’s ability to meet external financing obligations.
The country’s economy has been beset by multiple crises, including the fallout of devastating floods that killed 1,700 people, low foreign exchange reserves and decades-high inflation.
“The payment (was) made to Citibank New York,” State Bank of Pakistan (SBP) spokesman Abid Qamar told Reuters in a message.
The notes climbed to 98.9 cents to the dollar on Friday, “marking a nearly 16-cent comeback from a record low of 83 cents in October”, Bloomberg reported, citing its indicative pricing data.
The bond repayment, which matures on Dec 5, totals $1.08bn, the central bank chief said last week.
During the week ended Nov 25, SBP reserves stood at $7,498.7 million. It has since received $500m from the Asian Infrastructure Investment Bank.
DAWN
Bewal Express
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The crooks have taken PK to the verge of default. Its funny how [MENTION=135038]Major[/MENTION] [MENTION=131701]Mamoon[/MENTION] and others don't have the guts to come onto these threads anymore. If we default, PK Rp will hit 300-350 rps and that means more inflation and chaos. We have gone from 6% growth to no growth
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Pakistan’s borrowing options shrink
Almost $1.1b WB loan hangs in the balance
ISLAMABAD:
Pakistan’s borrowing options have remained limited after the international credit rating agencies downgraded its outlook to negative and debt rating to junk status, experts discussed in talk show The Review on Saturday.
Anchorperson Shahbaz Rana said that the situation had increased the country’s borrowing cost in addition to virtually closing the doors to floating Eurobonds. The renowned economic expert said that the foreign exchange reserves dropped below $8 billion ahead of the $1 billion Sukuk repayment on December 5, saying having an IMF mission in Islamabad had become very critical in soothing the frayed nerves.
For the current fiscal year, Rana said, the government has estimated the inflow of $7.7 billion in loans from the multilateral agencies. In four months, he added, $2.3 billion, which is 30%, has been disbursed. He revealed that the foreign commercial banks were also demanding an interest rate that was about 40% to 50% more than what the country was paying.
The anchorperson said, “the World Bank’s nearly $1.1 billion budget support loan is hanging in the balance,” adding: “Pakistan claims it has met the conditions for a $450 million loan but no date for a World Bank board meeting has been decided so far.”
Meanwhile, Rana said that the government had last week urged all stakeholders to complete pending actions hampering the conclusion of the $900 million settlement deal in the Reko Diq case by December 15th.
He also took up the issue of ongoing strike of the Economist, Technical, Commerce & Trade and the Information Group, saying the employees had staged a protest in front of the finance ministry for issuing a discriminatory notification that mostly favoured the all-powerful Pakistan Administrative Services. The strike has crippled work in their ministries for the past several days.
Express Tribune
Almost $1.1b WB loan hangs in the balance
ISLAMABAD:
Pakistan’s borrowing options have remained limited after the international credit rating agencies downgraded its outlook to negative and debt rating to junk status, experts discussed in talk show The Review on Saturday.
Anchorperson Shahbaz Rana said that the situation had increased the country’s borrowing cost in addition to virtually closing the doors to floating Eurobonds. The renowned economic expert said that the foreign exchange reserves dropped below $8 billion ahead of the $1 billion Sukuk repayment on December 5, saying having an IMF mission in Islamabad had become very critical in soothing the frayed nerves.
For the current fiscal year, Rana said, the government has estimated the inflow of $7.7 billion in loans from the multilateral agencies. In four months, he added, $2.3 billion, which is 30%, has been disbursed. He revealed that the foreign commercial banks were also demanding an interest rate that was about 40% to 50% more than what the country was paying.
The anchorperson said, “the World Bank’s nearly $1.1 billion budget support loan is hanging in the balance,” adding: “Pakistan claims it has met the conditions for a $450 million loan but no date for a World Bank board meeting has been decided so far.”
Meanwhile, Rana said that the government had last week urged all stakeholders to complete pending actions hampering the conclusion of the $900 million settlement deal in the Reko Diq case by December 15th.
He also took up the issue of ongoing strike of the Economist, Technical, Commerce & Trade and the Information Group, saying the employees had staged a protest in front of the finance ministry for issuing a discriminatory notification that mostly favoured the all-powerful Pakistan Administrative Services. The strike has crippled work in their ministries for the past several days.
Express Tribune
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Pakistan seeks emergency $3b Saudi cash injection
New COAS also expected to take up issue during his visit to kingdom
Pakistan on Wednesday requested Saudi Arabia to urgently provide $3 billion in cash after its foreign exchange reserves fell to a critically low level, as the new army chief was also expected to play a role in bagging the bailout during his upcoming maiden visit to the Kingdom.
Finance Minister Ishaq Dar made the request during a meeting with Nawaf bin Said Al-Malki, the Saudi ambassador, according to his ministry’s officials.
It was the second consecutive day when the finance minister held meetings with foreign diplomats in his efforts to seek their financial support and also influence the International Monetary Fund (IMF) to soften its stance on releasing its $1.2 billion tranche to the country.
Dar’s request for the cash bailout of $3 billion was over and above the same amount of money rollover of the previous debt.
However, there is an urgency of the matter, as the country’s foreign exchange reserves have fallen below the $7 billion level for the first time since January 2019.
The current reserves stand at around $6.7 billion, which is almost equal to $6.6 billion on January 18, 2019.
The $6.7 billion reserves are not enough to service the $8.8 billion principal and interest payments during the January-March period of the current fiscal year, according to the sources.
Dar thanked the ambassador for extending the term of a $3 billion deposit in the State Bank of Pakistan (SBP) by the Saudi Fund for Development (SFD), according to the finance ministry’s news statement.
In the first week of November, the finance minister had said Pakistan received “assurances of a $13 billion financial package from China and Saudi Arabia, including $5.7 billion in fresh loans”.
They included $4.2 billion from Saudi Arabia and $8.8 billion from China.
However, no progress could be made during the past one month and instead the country paid back two commercial loans of China, totalling $1.2 billion.
The $13 billion package is equal to 38% of the estimated gross external financing requirements of the country for the fiscal year 2022-23.
Its materialisation can eliminate the threat of default, as the IMF has not come up with a major financial package despite imposing numerous harsh conditions.
The sources said during the meeting it was also discussed that the new Chief of Army Staff (COAS), General Syed Asim Munir, would soon visit the Kingdom.
The military leadership would also take up the cash injection issue, it emerged after the meeting.
The news statement underlined that the finance minister informed the ambassador of Saudi Arabia about the ongoing post-flood reconstruction and rehabilitation programme.
During the meeting, both sides discussed the possibility to augment the current $1.2 billion Saudi oil facility on deferred payments.
There were also discussions on the $1 billion Saudi investment in Pakistan, according to the officials.
Pakistan is again looking towards the friendly countries as it has been unable to revive the $6.5 billion IMF bailout package -- derailed for the fourth time in three years.
The IMF has not yet finalised the dates for the staff-level talks -- much needed to acquire the next loan tranche of $1.2 billion.
Pakistan and the IMF teams on Wednesday held discussions about the practicality of the official estimates of $32 billion foreign inflows during the current fiscal year.
The discussions mainly focused on the $26 billion inflows estimates by the finance ministry, according to the sources.
The estimates included budgetary loans of $23 billion and grants of $1.5 billion, according to government sources.
Pakistan has estimated that it would receive $6.2 billion in foreign commercial loans, down from the previous estimate of $7.5 billion.
This money was not received during the first quarter.
Of the estimated foreign commercial loans of $6.2 billion, $3.5 billion will come from China.
The remaining $2.7 billion will be provided by the non-Chinese foreign commercial banks having shorter maturity periods.
Express Tribune
New COAS also expected to take up issue during his visit to kingdom
Pakistan on Wednesday requested Saudi Arabia to urgently provide $3 billion in cash after its foreign exchange reserves fell to a critically low level, as the new army chief was also expected to play a role in bagging the bailout during his upcoming maiden visit to the Kingdom.
Finance Minister Ishaq Dar made the request during a meeting with Nawaf bin Said Al-Malki, the Saudi ambassador, according to his ministry’s officials.
It was the second consecutive day when the finance minister held meetings with foreign diplomats in his efforts to seek their financial support and also influence the International Monetary Fund (IMF) to soften its stance on releasing its $1.2 billion tranche to the country.
Dar’s request for the cash bailout of $3 billion was over and above the same amount of money rollover of the previous debt.
However, there is an urgency of the matter, as the country’s foreign exchange reserves have fallen below the $7 billion level for the first time since January 2019.
The current reserves stand at around $6.7 billion, which is almost equal to $6.6 billion on January 18, 2019.
The $6.7 billion reserves are not enough to service the $8.8 billion principal and interest payments during the January-March period of the current fiscal year, according to the sources.
Dar thanked the ambassador for extending the term of a $3 billion deposit in the State Bank of Pakistan (SBP) by the Saudi Fund for Development (SFD), according to the finance ministry’s news statement.
In the first week of November, the finance minister had said Pakistan received “assurances of a $13 billion financial package from China and Saudi Arabia, including $5.7 billion in fresh loans”.
They included $4.2 billion from Saudi Arabia and $8.8 billion from China.
However, no progress could be made during the past one month and instead the country paid back two commercial loans of China, totalling $1.2 billion.
The $13 billion package is equal to 38% of the estimated gross external financing requirements of the country for the fiscal year 2022-23.
Its materialisation can eliminate the threat of default, as the IMF has not come up with a major financial package despite imposing numerous harsh conditions.
The sources said during the meeting it was also discussed that the new Chief of Army Staff (COAS), General Syed Asim Munir, would soon visit the Kingdom.
The military leadership would also take up the cash injection issue, it emerged after the meeting.
The news statement underlined that the finance minister informed the ambassador of Saudi Arabia about the ongoing post-flood reconstruction and rehabilitation programme.
During the meeting, both sides discussed the possibility to augment the current $1.2 billion Saudi oil facility on deferred payments.
There were also discussions on the $1 billion Saudi investment in Pakistan, according to the officials.
Pakistan is again looking towards the friendly countries as it has been unable to revive the $6.5 billion IMF bailout package -- derailed for the fourth time in three years.
The IMF has not yet finalised the dates for the staff-level talks -- much needed to acquire the next loan tranche of $1.2 billion.
Pakistan and the IMF teams on Wednesday held discussions about the practicality of the official estimates of $32 billion foreign inflows during the current fiscal year.
The discussions mainly focused on the $26 billion inflows estimates by the finance ministry, according to the sources.
The estimates included budgetary loans of $23 billion and grants of $1.5 billion, according to government sources.
Pakistan has estimated that it would receive $6.2 billion in foreign commercial loans, down from the previous estimate of $7.5 billion.
This money was not received during the first quarter.
Of the estimated foreign commercial loans of $6.2 billion, $3.5 billion will come from China.
The remaining $2.7 billion will be provided by the non-Chinese foreign commercial banks having shorter maturity periods.
Express Tribune
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Pakistan to get $32b loans this year
Rana rules out the possibility of economic emergency
Renowned economic and political experts said on Friday that there was no immediate chance of imposing economic emergency in the country as the government still hopes that it would get $32 billion loans this year.
Anchorpersons, Shahbaz Rana and Kamran Yousaf, while discussing current economic and political issues, noted that Pakistan’s official foreign exchange reserves had dropped to four years’ lowest level of $6.7 billion and the critical phase had begun.
During the show, the hosts discussed the government’s claims that country’s economy was moving towards stability and that IMF programme was getting back on track.
Rana ruled out the possibility of imposing an economic emergency in the country, saying: “Pakistan is still hoping to get a total of $32 billion in foreign funds in the current fiscal year”.
Keeping the low level of reserves, Rana said that Pakistan has recently requested Saudi Arabia to urgently provide $3 billion in cash after its foreign exchange reserves fell to a critically low level.
Rana also revealed that Pakistan needed a minimum $32 to $34 billion in the current fiscal year to finance its debt and bridge the current account deficit gap. He, however, said that the foreign inflows in the first four months remained at $4.2 billion.
The hosts also discussed if finance minister would be able to live-up to his promise to give 150 % executive allowance to the protesting employees, saying the annual impact of ending the injustice was Rs1.3 billion.
Express Tribune
Rana rules out the possibility of economic emergency
Renowned economic and political experts said on Friday that there was no immediate chance of imposing economic emergency in the country as the government still hopes that it would get $32 billion loans this year.
Anchorpersons, Shahbaz Rana and Kamran Yousaf, while discussing current economic and political issues, noted that Pakistan’s official foreign exchange reserves had dropped to four years’ lowest level of $6.7 billion and the critical phase had begun.
During the show, the hosts discussed the government’s claims that country’s economy was moving towards stability and that IMF programme was getting back on track.
Rana ruled out the possibility of imposing an economic emergency in the country, saying: “Pakistan is still hoping to get a total of $32 billion in foreign funds in the current fiscal year”.
Keeping the low level of reserves, Rana said that Pakistan has recently requested Saudi Arabia to urgently provide $3 billion in cash after its foreign exchange reserves fell to a critically low level.
Rana also revealed that Pakistan needed a minimum $32 to $34 billion in the current fiscal year to finance its debt and bridge the current account deficit gap. He, however, said that the foreign inflows in the first four months remained at $4.2 billion.
The hosts also discussed if finance minister would be able to live-up to his promise to give 150 % executive allowance to the protesting employees, saying the annual impact of ending the injustice was Rs1.3 billion.
Express Tribune
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Discussions on 9th review productive so far: IMF
International Monetary Fund (IMF) Resident Representative for Pakistan Esther Perez Ruiz said on Wednesday that discussions between Islamabad and the international moneylender on the ninth review of $7bn Extended Fund Facility had been “productive” so far.
Pakistan entered a $6bn IMF programme in 2019, which was increased to $7bn earlier this year. The programme’s ninth review is currently pending with remote talks being held between IMF officials and the government for the release of $1.18bn.
“Discussions to date in the context of the 9th review have been productive, and have enabled a revision to the macroeconomic outlook post floods as well as an in-depth evaluation of fiscal, monetary, exchange rate, and energy policies adopted since the completion of the combined seventh and eight reviews,” Ruiz told Dawn.com.
She added that the IMF “looks forward to continue the dialogue over policies that adequately address the humanitarian and rehabilitation needs from the floods while also preserving fiscal and external sustainability given available financing”.
Earlier, Dawn reported that Pakistan and IMF had had a round of engagement on November 18 but could not finalise a schedule for formal talks on the overdue ninth review.
The talks, originally due in the last week of October, were rescheduled to Nov 3 and then kept on facing delays following gaps in estimates by the two sides.
Earlier this month, Finance Minister Ishaq Dar’s interview on a private television channel raised eyebrows when he said he was not concerned whether the IMF team arrived in Pakistan for the ninth review, indicating that there may be an impasse in the ongoing talks.
Appearing on Geo News, the finance minister was questioned about the delayed arrival of the IMF team to which he said: “I don’t care if they come. I don’t have to plead before them. I have to look at Pakistan’s matters.”
A Dawn report last month said Pakistan was behind on multiple performance criteria essential for the completion of the review, with authorities hinting they had asked for some waivers from the financial institution.
For its part, the IMF said in a statement that Pakistan’s “timely finalisation” of a recovery plan from floods was essential to support discussions and continued financial support.
‘Must complete IMF programme for Pakistan’s credibility’
The finance minister addressed the delay in the ninth IMF review again today, stressing the need for Pakistan to complete the programme.
Speaking at the Second Pakistan Prosperity Forum, he said: “I don’t blame the Fund, but let me say that the ninth review in totality — all performance criteria are in order. Had they come in October and reviewed, the ninth review would have been over.”
Dar added, “I don’t want to indulge in global politics, but I did request them to come in late October or early November. They chose not to.”
The finance minister, however, also acknowledged that Islamabad had created a “credibility gap” between the two parties.
“Once you commit to agreed conditionalities … you should implement them,” he said, asserting that a party was “ethically” and contractually“ bound to implement conditions agreed between two sides.
After agreeing “on a roadmap [with the IMF], your country and the previous government chose not to implement [the agreed conditions] and reverse what they had done earlier.
“That has created a credibility gap.”
In light of this experience, the finance minister added, the IMF now wanted the government to share with them plans for the next three quarters.
Moreover, he said, the Fund also required the government to demonstrate how it would meet the needs of $16bn for flood reconstruction and rehabilitation.
“Reconstruction and rehabilitation [efforts] are going to take five to seven years and to worry about it now — I won’t say that beggars are not choosers but lenders have their own wish list,” Dar said.
But, he added, “my endeavour is to complete the programme.
“Let Pakistan have the credit for completing the programme for the second time … I wish for the credibility of Pakistan that we complete this programme.
“I may personally disagree with many things, but I am trying to provide everything and anything, My team is at it.”
DAWN
International Monetary Fund (IMF) Resident Representative for Pakistan Esther Perez Ruiz said on Wednesday that discussions between Islamabad and the international moneylender on the ninth review of $7bn Extended Fund Facility had been “productive” so far.
Pakistan entered a $6bn IMF programme in 2019, which was increased to $7bn earlier this year. The programme’s ninth review is currently pending with remote talks being held between IMF officials and the government for the release of $1.18bn.
“Discussions to date in the context of the 9th review have been productive, and have enabled a revision to the macroeconomic outlook post floods as well as an in-depth evaluation of fiscal, monetary, exchange rate, and energy policies adopted since the completion of the combined seventh and eight reviews,” Ruiz told Dawn.com.
She added that the IMF “looks forward to continue the dialogue over policies that adequately address the humanitarian and rehabilitation needs from the floods while also preserving fiscal and external sustainability given available financing”.
Earlier, Dawn reported that Pakistan and IMF had had a round of engagement on November 18 but could not finalise a schedule for formal talks on the overdue ninth review.
The talks, originally due in the last week of October, were rescheduled to Nov 3 and then kept on facing delays following gaps in estimates by the two sides.
Earlier this month, Finance Minister Ishaq Dar’s interview on a private television channel raised eyebrows when he said he was not concerned whether the IMF team arrived in Pakistan for the ninth review, indicating that there may be an impasse in the ongoing talks.
Appearing on Geo News, the finance minister was questioned about the delayed arrival of the IMF team to which he said: “I don’t care if they come. I don’t have to plead before them. I have to look at Pakistan’s matters.”
A Dawn report last month said Pakistan was behind on multiple performance criteria essential for the completion of the review, with authorities hinting they had asked for some waivers from the financial institution.
For its part, the IMF said in a statement that Pakistan’s “timely finalisation” of a recovery plan from floods was essential to support discussions and continued financial support.
‘Must complete IMF programme for Pakistan’s credibility’
The finance minister addressed the delay in the ninth IMF review again today, stressing the need for Pakistan to complete the programme.
Speaking at the Second Pakistan Prosperity Forum, he said: “I don’t blame the Fund, but let me say that the ninth review in totality — all performance criteria are in order. Had they come in October and reviewed, the ninth review would have been over.”
Dar added, “I don’t want to indulge in global politics, but I did request them to come in late October or early November. They chose not to.”
The finance minister, however, also acknowledged that Islamabad had created a “credibility gap” between the two parties.
“Once you commit to agreed conditionalities … you should implement them,” he said, asserting that a party was “ethically” and contractually“ bound to implement conditions agreed between two sides.
After agreeing “on a roadmap [with the IMF], your country and the previous government chose not to implement [the agreed conditions] and reverse what they had done earlier.
“That has created a credibility gap.”
In light of this experience, the finance minister added, the IMF now wanted the government to share with them plans for the next three quarters.
Moreover, he said, the Fund also required the government to demonstrate how it would meet the needs of $16bn for flood reconstruction and rehabilitation.
“Reconstruction and rehabilitation [efforts] are going to take five to seven years and to worry about it now — I won’t say that beggars are not choosers but lenders have their own wish list,” Dar said.
But, he added, “my endeavour is to complete the programme.
“Let Pakistan have the credit for completing the programme for the second time … I wish for the credibility of Pakistan that we complete this programme.
“I may personally disagree with many things, but I am trying to provide everything and anything, My team is at it.”
DAWN
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Prime Minister Shehbaz Sharif on Wednesday expressed the coalition government’s resolve to complete the current $7bn Extended Fund Facility programme with the International Monetary Fund (IMF).
Pakistan entered a $6bn IMF programme in 2019, which was increased to $7bn earlier this year. The programme’s ninth review is currently pending with remote talks being held between IMF officials and the government for the release of $1.18bn.
Earlier today, IMF Resident Representative for Pakistan Esther Perez Ruiz told Dawn.com that discussions between Islamabad and the international moneylender on the ninth review had been “productive” so far.
Addressing a high-level meeting in the Prime Minster’s House regarding the overall economic situation today, the premier reaffirmed the commitment towards completing the IMF programme.
Pakistan entered a $6bn IMF programme in 2019, which was increased to $7bn earlier this year. The programme’s ninth review is currently pending with remote talks being held between IMF officials and the government for the release of $1.18bn.
Earlier today, IMF Resident Representative for Pakistan Esther Perez Ruiz told Dawn.com that discussions between Islamabad and the international moneylender on the ninth review had been “productive” so far.
Addressing a high-level meeting in the Prime Minster’s House regarding the overall economic situation today, the premier reaffirmed the commitment towards completing the IMF programme.
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Stalled programme revival: IMF asks Pakistan to meet all demands in three weeks
Minister for Finance Ishaq Dar expected to hold consultations with core economic team in couple of days
The IMF has shared lists of prerequisite actions and told Pakistani authorities in plain words that Islamabad will have to move towards implementing all demands in the next 15 to 20 days for reviving the stalled Fund programme.
Now the time has come for taking “all required actions” by Pakistani authorities and there is a timeframe of two to three weeks for implementing all required actions that could pave the way for striking a staff-level agreement and releasing of $1 billion tranche under the Extended Fund Facility (EFF).
Minister for Finance Ishaq Dar is expected to hold consultations with his core economic team in a couple of days for evolving consensus on required actions going to be taken in the coming few weeks for paving the way for the revival of the IMF programme.
...
https://www.thenews.com.pk/print/10...s-pakistan-to-meet-all-demands-in-three-weeks
Minister for Finance Ishaq Dar expected to hold consultations with core economic team in couple of days
The IMF has shared lists of prerequisite actions and told Pakistani authorities in plain words that Islamabad will have to move towards implementing all demands in the next 15 to 20 days for reviving the stalled Fund programme.
Now the time has come for taking “all required actions” by Pakistani authorities and there is a timeframe of two to three weeks for implementing all required actions that could pave the way for striking a staff-level agreement and releasing of $1 billion tranche under the Extended Fund Facility (EFF).
Minister for Finance Ishaq Dar is expected to hold consultations with his core economic team in a couple of days for evolving consensus on required actions going to be taken in the coming few weeks for paving the way for the revival of the IMF programme.
...
https://www.thenews.com.pk/print/10...s-pakistan-to-meet-all-demands-in-three-weeks
Hitman
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Does anyone have any idea how the money will be repaid with interest? I'm not taking a dig here, I genuinely want to know what Pakistanis think how it will be repaid.
wasim-fan
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By sales of state assets. There is no other way. The deficit will only increase with ongoing recession. Exports will decline further. Once the delirium of local politics and junooni taaqat is over, stark reality is awaiting.
The other way is US to bail them out in exchange for something.
Hitman
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China or US would bail Pakistan out, definitely. But just imagine at what cost it would come?
daytrader
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Govt wary of IMF-mandated ‘tough decisions’ in an election year
The government’s fear of losing popularity before the elections seems to be keeping Pakistan from finalising a deal with the International Monetary Fund (IMF) that could stabilise the economy.
Official and diplomatic sources told Dawn on Monday that both sides were still discussing the seven demands that the IMF wants Pakistan to accept before it resumes economic assistance to the country.
The demands include withdrawing electric subsidies, linking gas prices to the international market, free-floating dollars, and not blocking LCs.
The government “fears that implementing some of these demands will hike the price of essential items across the board,” a source said.
“It will make the government even more unpopular than it already is, so close to the elections.”
Pakistan’s power regulator has already allowed Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company (SSGC) to hike rates up to 75 percent, subject to cabinet approval.
...
https://www.dawn.com/news/1733337/govt-wary-of-imf-mandated-tough-decisions-in-an-election-year
The government’s fear of losing popularity before the elections seems to be keeping Pakistan from finalising a deal with the International Monetary Fund (IMF) that could stabilise the economy.
Official and diplomatic sources told Dawn on Monday that both sides were still discussing the seven demands that the IMF wants Pakistan to accept before it resumes economic assistance to the country.
The demands include withdrawing electric subsidies, linking gas prices to the international market, free-floating dollars, and not blocking LCs.
The government “fears that implementing some of these demands will hike the price of essential items across the board,” a source said.
“It will make the government even more unpopular than it already is, so close to the elections.”
Pakistan’s power regulator has already allowed Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company (SSGC) to hike rates up to 75 percent, subject to cabinet approval.
...
https://www.dawn.com/news/1733337/govt-wary-of-imf-mandated-tough-decisions-in-an-election-year
Romali_rotti
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Look at this thread.
In debt take loan, get into bigger debt and take out for bigger loans to pay them.
Absolutely nothing or almost no money generated from The economy...
In 21st century if a country is going like this, it should not be considered a country..
Where the heck is Pakistan headed to ????.
In debt take loan, get into bigger debt and take out for bigger loans to pay them.
Absolutely nothing or almost no money generated from The economy...
In 21st century if a country is going like this, it should not be considered a country..
Where the heck is Pakistan headed to ????.
It's majorly consumption driven economy. And consumption also based on external finance.
Romali_rotti
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I gotta admit, it takes unbelievable resilience, skill and determination like no other to ruin a country like this and set it on a path of no return...
I don't know if it's true but read somewhere that Pakistan has 22000 officials in government, administration, banks who have dual citizenship. It's unbelievable that those who are responsible for the country are not dedicated but always have the option of an exit if things go wrong. Don't know if this is also allowed in army. Some serious legislative reforms are needed.
wasim-fan
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Pakistan is on path of secular decline. Will require something special to revive it from here.
Romali_rotti
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Well Pakistani people seems perfectly happy with the Military in charge, they do not want to rebel or take to the streets to over throw the control the Military has, so Pakistanis in Pakistan can go the way are...
In the meantime atleast Pakistan is fighting for Kashmir and Supporting Palestine while they are nearly all out of cash...
So we know Pakistan definitely has their priorities correct...
Don't think any common man on the street cares that much for these things unless they are getting paid or getting food for a rally. That Kashmir, Palestine etc has been the priority of Elite and upper middle class.
Local.Dada
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The politicians and establishment (army) can’t do much without the strong sentiments of the people. Leave alone traditional rival India, The pakistan masses might not know where Israel is on the map but the hate it very strongly based on the way they respond to IK and other politicians/mullah speeches.
Surely masses are gullible and gets easily manipulated , as such leadership caters to it and reflects that sentiment to an extent. But when inflation is high, food is scarce, income is stagnant, masses focus on survival. Everything else takes a back seat.
Kianig89
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The end is nigh, from that sham dollar rate of 228, to now banks and exchangers decide to set dollar at 252 while in equilibrium it should be 295 whereas under the carpet it's trading between 260-275
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Pakistan on Wednesday assured the United States that it remained committed to the International Monetary Fund (IMF) programme, as the country’s reserves slipped to just half a month import cover after making a fresh debt repayment of $500 million.
Finance Minister Ishaq Dar met Robert Kaproth, Deputy Assistant Secretary of the US Department of the Treasury for Asia, according to an official announcement by the Ministry of Finance.
Express Tribune
Finance Minister Ishaq Dar met Robert Kaproth, Deputy Assistant Secretary of the US Department of the Treasury for Asia, according to an official announcement by the Ministry of Finance.
Express Tribune
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