Ishaq Dar, the finance minister, stated on Friday that the government would swiftly introduce a mini-budget to generate Rs170 billion more in tax revenue over the next four months and reform the power and gas sectors, including by removing unbudgeted subsidies and raising tariffs to stop the flow of circular debt, as previously agreed with the International Monetary Fund (IMF) to secure early disbursement of an approximately $1.2 billion tranche.
The minister said all issues with the fund had been resolved in the final round held on Thursday, and the mutually agreed terms were taken to the prime minister as a customary courtesy call-on by the IMF mission chief and resident representative via video link. The minister’s remarks came shortly after the IMF issued a bland end-of-mission statement.
The government received the draught Memorandum of Economic & Fiscal Policies (MEFP) from the IMF on Friday morning. According to Mr. Dar, “We have positively completed everything, and there is now no confusion on anything.” He added that the government would review the MEFP this weekend and start virtual meetings to discuss it on the following Monday to move the process along.
According to Mr. Dar, the staff-level agreement is announced, followed by the signing of a letter of intent (LOI), and is then brought before the executive board of the meeting for approval and disbursement.
“This is a standard process which cannot be shortened and hopefully they would not unnecessarily extend it,” the minister said, explaining that once this process was completed Pakistan would be entitled to $894 statutory drawing rights of the IMF with a calculated value of $1.2bn.
In a brief statement, the IMF expressed appreciation for “the Prime Minister’s determination to execute policies essential to protect macroeconomic stability” and noted that “significant progress” had been made on steps to resolve domestic and international imbalances.
Similar to its pre-visit statement, the IMF reaffirmed the key priorities as strengthening the fiscal position with long-term revenue measures and reducing untargeted subsidies, while stepping up social protection to help the most vulnerable and those affected by the floods; allowing the exchange rate to be determined by the market to gradually end the foreign exchange shortage; and improving energy provision by preventing further accumulation of circular debt and ensuring that the country has access to sufficient supplies of clean energy.
The successful restoration of macroeconomic stability and the advancement of Pakistan’s sustainable development depend on the timely and decisive implementation of these policies, according to the IMF. Furthermore, it was assured that “virtual conversations would carry on in the upcoming days to complete the implementation details of these policies.”