The government on Thursday invited the International Monetary Fund (IMF) to send a mission to Pakistan as soon as possible, preferably next week, to finalize a long-awaited agreement to resuscitate the loan program, expressing its willingness to accept all four of the IMF’s main conditions.
After a week of consultations, which included at least two sessions presided over by Prime Minister Shehbaz Sharif via video link from Lahore, a senior member of the government declared, “We have completed our workings on all four areas on the basis of our interactions on the sidelines of the Geneva conference.”
We are prepared to carry out the reforms promised by the program, and we want to put these choices into effect while in talks with the potential IMF mission, the official said.
Hamed Yaqoob Shaikh, the secretary of finance, has formally invited the IMF mission chief to Pakistan. Another participant claimed that the IMF bailout package was the only way out of Pakistan’s current problems and that there was no other way to prevent default, thus the Fund delegation was asked to sit across the table and settle everything.
He said that the failure to take the necessary steps to convince the Fund to send the mission was due to the fact that each decision included considerable difficulties and, absent countermeasures, may worsen the situation in an already fragile economy.
The cost of debt payment could increase if the central bank’s policy rate is raised to combat inflation. In addition, he added, rising gas and electricity prices would fuel inflation.
An estimated Rs70–80 billion in income is planned to be levied against banks who had made enormous profits from foreign exchange operations, while the remaining Rs150 billion will need to come from other sources, such as a flood fee on imports.
As a result, he said, the government might take some measures that the IMF deems insufficient to achieve the goal and necessitate additional measures that might not be practical in a timely manner.
Another official claimed that when the IMF visited Pakistan to finalize a staff-level agreement, the government had informed the Fund that it was prepared to implement decisions in line with Geneva discussions.
Given the current engagements and the financial difficulties brought on by the consequences of the floods, they are also expected to demonstrate some flexibility, he added.
The Fund made four main demands, including a market-based exchange rate, higher electricity and gas prices (by nearly an average of Rs. 7 per kW-hour and Rs. 750 per MMBtu, respectively), and additional taxes to make up for revenue slippages (by nearly Rs. 100 billion by one estimate and by nearly Rs. 225 billion by another estimate) in order to keep the fiscal deficit within the original program targets with adjustments for flood expenses.
The government members stated that the focus of all these measures would not be allowed to trickle down to the general populace and that the wealthier groups of people would bear the lion’s share of the burden.
“We have no choice than to satisfy the Fund going forward. Pakistan cannot afford for the delegation to simply claim no progress if the negotiations fail, an official said.
Dr. Aisha Ghaus Pasha, the state minister for finance, said Pakistan had informed the IMF that it was prepared to carry out the agreed-upon changes and that it wished to resolve any unresolved difficulties. She said the government wanted to continue the IMF program in a manner that the common people did not bear the burden of tough decisions.