According to the agreement reached with the International Monetary Fund (IMF), new taxes of Rs170 billion will be levied, necessitating the introduction of a mini-budget, Finance Minister Ishaq Dar declared on Friday.
Dar was speaking during a press conference following the departure of an IMF mission from Pakistan without signing a staff-level agreement, on which the government was relying to rescue its failing economy.
The finance czar’s speech came just after the IMF published a brief statement on its talks with Pakistan, stating that virtual talks will continue to finalize important priorities. According to the agreement reached with the International Monetary Fund (IMF), new taxes of Rs170 billion will be levied, necessitating the introduction of a mini-budget, Finance Minister Ishaq Dar declared on Friday.
Dar was speaking during a press conference following the departure of an IMF mission from Pakistan without signing a staff-level agreement, on which the government was relying to rescue its failing economy. The finance czar’s speech came just after the IMF published a brief statement on its talks with Pakistan, stating that virtual talks will continue to finalize important priorities.
Despite a failure in achieving a deal with the IMF, the finance minister declared the parleys with the global lender ended “positively”. He acknowledged that the government had received from the global lender a draught of the Memorandum of Economic and Financial Policies (MEFP) relating to the completion of the ninth review of a $7 billion loan programme.
“I am confirming that we received the MEFP draught at 9 a.m. today,” he stated.
The draught MEFP is required to pave the way for a staff-level agreement to be reached. It may be regarded as the pinnacle of decisions reached between Pakistan and the Fund because it includes policy actions and structural benchmarks agreed upon by both parties.
What did the IMF have to say?
IMF mission leader Nathan Porter said in a brief statement that “virtual consultations” between the two sides will continue in the next days to finalize the “implementation specifics” of the policies.
According to Porter, prompt and decisive policy implementation, as well as steadfast financial support from official partners, are vital for Pakistan to successfully reestablish macroeconomic stability and promote its sustainable development.
The statement applauded Prime Minister Shehbaz Sharif’s commitment to execute policies that are essential to “safeguard macroeconomic stability”. He also commended the government for taking part in “productive dialogues”.
During negotiations with Pakistani officials on policy steps to alleviate domestic and external imbalances, Porter remarked that “substantial progress” was made.
According to the IMF mission chief, the “key priorities include strengthening the fiscal position with permanent revenue measures and reductions in untargeted subsidies, while scaling up social protection to help the most vulnerable and those affected by the floods; allowing the exchange rate to be market determined to gradually eliminate the foreign exchange shortage; and enhancing energy provision by preventing further accumulation of circular debt and ensuring the viability of energy sector.
Monday’s virtual meeting with the IMF
Following his confirmation that Pakistan had received the MEFP draught, Minister Dar stated that a virtual meeting with the Washington-based lender will now be arranged to move things forward. “The administration and its economic team are attempting to reach an agreement with the IMF,” he explained.
The finance minister reminded the media at the opening of his press conference that the government is implementing a programme inked by former Prime Minister Imran Khan with the IMF in 2019-2020. He maintained that the Shehbaz Sharif-led government is holding talks on this deal as a “sovereign obligation”.
“This is an old arrangement that had previously been suspended and delayed,” he explained. Concerning Pakistan’s negotiations with the IMF delegation, the finance minister stated that the 10-day-long discussions included the power and gas sectors, as well as the fiscal and monetary aspects.
“The SBP governor and officials from several agencies and ministries were present,” Dar said. Dar focuses on reducing untargeted subsidies.
To restore the credit facility, the finance minister announced the imposition of new levies totaling Rs170 billion, as well as energy sector changes. He also noted that the administration was concentrating on “minimizing untargeted subsidies”.
According to the finance minister, some of the IMF-recommended measures are beneficial to Pakistan.
Dar emphasized the need for changes in Pakistan, adding that the prime minister has told the IMF that the government will implement them. “The government will prevent the growth of circular debt in the power and gas industries,” Dar stated.