ISLAMABAD: Tuesday marked the beginning of talks between Pakistan and the International Monetary Fund (IMF) to reach a staff-level agreement on the ninth review under the $7 billion Extended Fund Facility (EFF).
When IMF mission chief Nathen Porter arrived at the Finance Ministry, he was received by Finance Minister Ishaq Dar.
Monday saw the arrival of the IMF’s review team in Islamabad, where both sides are engaging in their most difficult negotiations yet for redoubled efforts to complete the upcoming ninth review under the $7 billion EFF.
The government is expected to share its plan for taking additional taxation measures with the visiting review mission, according to a report in The News earlier today.
The topic of discussion will be Pakistan’s plan to eliminate the monstrosity of the circular debt by increasing electricity and gas prices, rationalizing expenditure, and taking additional tax measures to collect more than Rs200 billion through a presidential ordinance.
At a time when foreign exchange reserves are persistently on the decline and have reached their lowest ebb of $3.6 billion, the lender with headquarters in Washington is recommending the most severe prescriptions for the economy across the board.
However, prior to the talks, the government had already implemented two significant conditions, which included allowing the rupee to be adjusted in relation to the dollar and raising record levels of a surge in petroleum prices.
In order to keep the budget deficit and primary deficit within the desired ranges, the IMF is requesting that the government reduce expenditures or implement additional taxation measures to close the massive fiscal gap of Rs600 billion.
The exact fiscal gap remained a source of disagreement, and both sides will engage in negotiations to reach a consensus on the precise estimates for the upcoming mini-budget’s adoption of additional taxation measures.
From today to Friday, Pakistan and the IMF will hold technical talks, and then policy talks will begin to finish the Memorandum of Financial and Economic Policies (MEFP) document.
The IMF also wanted the electricity price to go up by Rs12.50 per unit, and Islamabad seemed to agree to raise the price of electricity by Rs7.50 per unit in stages.
During the upcoming talks with the International Monetary Fund, the government may agree to stop providing powerful groups with untargeted subsidies for the electricity and gas sectors. Customers will also see a 74% increase in the price of gas.
The gap has widened to such an extent that the economy cannot continue to function in accordance with the status quo that we will have to swallow bitter pills. The burden will fall on the middle class of the nation.
Top official sources told a select group of reporters on Monday night, “We have made a plan to protect vulnerable and poor segments of the society while implementing the IMF conditions.” They were speaking to the reporters.
During a background discussion, senior officials stated that the government would focus on two areas, including reform implementation and protecting the poor and vulnerable from inflationary pressures, in order to protect the poorest of the poor from having to swallow bitter pills.
According to the official, Finance Minister Dar was attempting to secure $4-5 billion from bilateral friends in order to engage the IMF with the point of strength; however, this attempt was unsuccessful, leaving him with no choice but to redouble his efforts to restart the stalled IMF program.
High-ranking officials at the Federal Board of Revenue (FBR) believe that the recent exchange rate devaluation will contribute to an increase in tax revenues of Rs100 billion over the remainder of the current fiscal year.
Referring to the National Austerity Committee’s recommendations to Prime Minister Shehbaz Sharif, the committee concluded that all ministries, including the Ministry of Defense, should reduce spending by 15%.
The committee requests that all plots obtained by influential segments be surrendered to multiple parties. If implemented, the committee’s recommendations could total Rs600-700 billion annually. But there are a lot of big ifs and buts about who will put these bold decisions into action, which are now necessary to take in order to avoid crises.
