- Finance minister says power sector reforms, minimising untargeted subsidy key priorities for IMF programme revival
Federal Minister for Finance and Revenue Ishaq Dar on Friday said that the government would impose additional taxation measures to the tune of Rs170 billion under the policies agreed with the International Monetary Fund (IMF).
“Yesterday, we ended the final round of talks with the IMF after ten days of extensive discussions on power, fiscal, monetary sides,” said Dar while addressing the media.
The finance minister added that the government remains committed to implement the IMF agreement.
“We have received the draft of the Memorandum of Economic and Financial Policies (MEFP) from the IMF. On Monday, we would hold a virtual meeting with the IMF on MEFP,” he said.
He said the misgovernance of the last five years needs to be fixed. “I think that the 10-day dialogue has concluded positively, there is no obscurity anymore,” he added.
“After a few meetings, the IMF Executive Board would give its approval, and Pakistan would receive the next tranche of $1.2 billion or 894 million SDR,” he said.
“Under the policy package, the government would need to implement tax measures to the tune of Rs170 billion, and we would try not to impose any tax that will further burden the common man,” he said.
Dar said that the government would implement reforms in the power sector. “We would minimise the untargeted subsidies and curb the circular debt in gas and petroleum sector. This is one of the understanding in agreement,” he added.
He said that the commitment made with the IMF on Petroleum Development Levy (PDL) has been achieved. “Rs50 PDL on petrol has already been realised. Meanwhile, out of the Rs50 PDL on diesel, Rs40 has already been implemented, while the remaining amount would added in the coming months,” he said.
“Under the IMF negotiations, we have decided to raise the budget of Benazir Income Support Programme (BISP) from Rs360 billion to Rs400 billion, to protect the low-income segment.”
Dar remained optimistic that the commitments made by the friendly countries would materialise soon as well, and the pressure on foreign exchange reserves would subside.
According to the State Bank of Pakistan (SBP) weekly report issued on Thursday, the total liquid foreign reserves held by the country stood at $8.54 billion as of February 3, 2023 compared to $8.74 billion as of Jan 27, 2023.
During the week under review, SBP’s reserves decreased by $170 million to $2.918 billion due to external debt repayments. The SBP’s reserves can cover the import of two weeks.
“Due to past government actions, there is a credibility gap, they (IMF) do not trust us. IMF says that after reaching the agreement, the previous government not only didn’t implement the programme but reversed it, which damaged Pakistan credibility and reputation,” he said.
“On external financing, one source is the commitments made by friendly countries. Secondly, the privatization of Haveli Bahadur Shah and Baloki remains on track,” he said.
He clarified that taxes of Rs170 billion need to be collected in this fiscal year.
Dar’s press conference comes after the IMF statement issued at the conclusion of its mission’s 10-day visit to Islamabad, in which the lender stressed that while it welcomes the commitment, “timely and decisive implementation of policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability”.
The IMF added that virtual discussions will continue to finalise the implementation details of policies, implying that an agreement to revive the programme through a staff-level agreement may still take some time as Pakistan moves to execute the prior actions.
Earlier, Secretary Finance Hamid Yaqoob Shaikh told media persons on Thursday that an agreement on actions and prior actions was reached during the technical and policy-level talks with the IMF and staff-level agreement would be reached after the approval from the IMF headquarters in Washington.
The official also acknowledged that there are some differences between the two sides and the solution does not fall within the mandate of the Fund’s mission and the staff team has to explain to their seniors with regard to internal processing of these differences.
“We have reached an agreement with the Fund on actions and prior actions but staff-level agreement would be reached subsequently after the approval by Washington [IMF headquarters],” he said, adding that the Fund’s team shared memorandum of economic and financial policies (MEFP) with the Pakistani authorities and the country’s external financing needs were also discussed.
He said that the IMF’s board always seeks assurance of bilateral and commercial financing and Pakistan was not asked about anything different this time.