- At event in Islamabad, PM Shehbaz says assistance from China and IMF will help Pakistan bring investment, and increase export earnings
Prime Minister Shehbaz Sharif said on Tuesday that the International Monetary Fund (IMF) will club the seventh and eighth reviews of Pakistan's Extended Fund Facility (EFF), and disburse roughly $1.9 billion in the coming days.
The seventh tranche is worth $900 million and the eighth is worth $1 billion, raising the prospect of $1.9 billion being disbursed once the IMF board gives the all-clear to resume the bailout programme.
Speaking at the 'Turn Around Pakistan Conference' in Islamabad, the PM said the grants from China and IMF will help Pakistan attract investment and increase its export earnings.
The statement comes as Pakistan said it has received combined economic and financial targets for the seventh and eighth reviews of its IMF bailout programme.
The combined reviews mean disbursement of roughly twice the amount being expected by Pakistan earlier, which was around $900 million. However, to achieve this, Islamabad will have to meet combined targets set forth by the Memorandum of Economic and Financial Policies (MEFP).
Pakistan has been making all-out efforts to revive the IMF programme to avert a balance of payment crisis that has been aggravated by soaring energy prices.
Central bank foreign currency reserves have fallen to as low at $8.2 billion, barely enough to cover six weeks of imports, and the economy is reeling from sharp depreciation in the Pakistani rupee and double-digit inflation. However, reserves held by the State Bank of Pakistan are likely to get a boost after the agreement with Chinese banks.
PM Shehbaz also said at the event that the government is working for "self-sufficiency of Pakistan. "Due to the prevailing global energy crisis, the international price of coal has soared over the past few months.
“We were forced to choose between load-shedding or draining foreign exchange reserves to import coal,” he said, adding that the price of coal had receded marginally.
He lamented that Pakistan lacked a long-term energy agreement and an oil deal made with Qatar was proving to be a lifeline for the country.
“When energy rates fell, the past government failed to enter into long-term energy agreements,” he said. “Now, we are struggling for bids.”
Speaking on the occasion, Finance Minister Miftah Ismail also said Pakistan will receive nearly $2 billion from the IMF instead of $1 billion.
He added that “our ultimate goal remains a journey towards self-reliance. That will be our legacy.
“I want to congratulate the PM that today, we have taken the first step towards the journey of achieving self-reliance."
Miftah also said that Pakistan could achieve self-reliance in ten years by focusing on inclusive and sustainable growth.
He said that the incumbent government was compelled to take difficult decisions, including increasing the prices of petroleum products as it was facing record fiscal deficits. “This year alone, our deficit stood at Rs5,000 billion. Furthermore, Pakistan has to pay interest payments to the tune of Rs4,000 billion,” he said.
He said Pakistan's tax-to-GDP ratio stands at 8.6%, which is one of the lowest in the world. “We needed to fix this situation."
The minister lambasted the previous government for its subsidies on petroleum products, which led to monthly losses of Rs120 billion. “This could have bankrupted the country. Thus, we hiked petroleum rates."
He said that the government has imposed a super tax to the tune of 4% to 10% on companies for one year.
“We are also bringing in retailers into the tax net, and have fixed their income and sales tax. In the coming days, we will bring builders, real estate dealers, furniture manufacturers, auto dealers into the tax net,” he said, adding that a fixed tax would be levied on them, as the government seeks to achieve self-reliance.
“As a result of these measures, the government will collect 33% more revenue in tax and levies this year, as compared to last year.
"Furthermore, the government intends to reduce the primary deficit, which currently stands at Rs1,600 billion, to a surplus of Rs152 billion."
Miftah reiterated that “Pakistan is out of the danger of default", but added that economic conditions remain tough.