Tag: loan

  • IMF likely to announce staff level agreement with Pakistan by this week

    IMF likely to announce staff level agreement with Pakistan by this week

    According to Syed Naveed Qamar, the Federal Minister for Commerce, Pakistan has taken all necessary measures to unfreeze a $6.5 billion credit line and is expected to reach a staff level agreement (SLA) on Extended Fund Facility (EFF) with the International Monetary Fund (IMF) this week.

    Dr Aisha Ghaus Pasha, the Minister of State for Finance, stated that Pakistan and the IMF are close to reaching an SLA, but that basic structural reforms are necessary regardless of whether they are part of the IMF program or not.

    After the formal announcement, Pakistan will receive a $1.2 billion tranche under the EFF. Qamar stated that the agreement would give investors and creditors confidence in Pakistan’s stabilising economy and that their money would remain protected.

    Qamar emphasized that the IMF program is the beginning of other funds flowing in and that increased imports would benefit exports.

    However, Pakistan is struggling to meet the tough conditions set by the IMF, such as increasing its low tax base, ending exemptions for the export sector, and raising artificially low energy prices. The country is in dire need of funds as the State Bank of Pakistan-held foreign exchange reserves only cover one month of imports.

    To meet IMF conditions, Pakistan has raised taxes, cut subsidies, and devalued its currency. Additionally, a supplementary finance bill was approved that increases sales tax from 17 per cent to 25 per cent on imports and raises general sales tax from 17 per cent to 18 per cent, increasing the burden on already inflation-stricken people.

  • Rs170 billion in taxes to be imposed through mini-budget for revival of IMF loan program

    The Minister of Finance, Ishaq Dar, has announced that the talks between Pakistan and the International Monetary Fund (IMF) have concluded positively. In order to revive the loan program, the government will be required to implement a mini-budget, which includes collecting approximately Rs170 billion in taxes.

    During a media briefing, the finance minister confirmed receipt of the draft of the Memorandum of Economic and Financial Policies (MEFP) from the IMF based in Washington. At the outset of his media address, the minister emphasized that the current government is continuing to implement the program signed by former Prime Minister Imran Khan with the IMF in 2019-2020, and that the talks are being held as a “sovereign commitment” under the leadership of Shehbaz Sharif.

    “This is an old agreement which had been suspended and delayed previously,” he noted. 

    Regarding the discussions between Pakistan and the IMF mission, the finance minister stated that the talks, which lasted for ten days, were comprehensive and covered a range of topics including the power and gas sectors, as well as the fiscal and monetary aspects.

    “The SBP governor and officials from different departments and ministries participated in the talks,” said Dar.

    Finance Minister Ishaq Dar has shared details of the agreement reached with the IMF regarding the country’s financial situation. The finance minister confirmed that taxation measures of Rs170 billion will be taken, dispelling rumors of a larger figure of Rs700-800 billion.

    Dar highlighted that reforms in the energy sector will be a key focus, aimed at curbing the flow of circular debt, particularly in the gas sector where efforts will be made to bring the circular debt to zero and minimize untargeted subsidies.

    The minister acknowledged that some of the reforms suggested by the IMF are beneficial for Pakistan and emphasized the need for reforms in the country. He added that Prime Minister Shehbaz Sharif has assured the IMF of the government’s commitment to implement the necessary reforms.

    As per the standard procedure, a MEFP and a letter of intent are given. “The government has received the MEFP draft this morning and we will go through it on the weekend. A virtual meeting with the IMF will be held after that on Monday,” he added.

    “We believe that there are some sectors that need to be reformed in Pakistan’s interest,” he said.

    The Minister of Finance, in a statement, indicated that the country’s economy is facing significant challenges, with its current ranking standing at 47. The minister attributed the economic struggles to poor governance and mismanagement, and emphasized the need to address and rectify the situation.

    In reference to the power sector, the finance minister noted that a large portion of the national budget, approximately Rs3,000 billion, is spent on electricity generation, however, the recovery rate for these expenditures is only Rs1,800 billion. This highlights the pressing need for reforms and improvements in the sector to enhance efficiency and ensure sustained economic growth.

    “Even though these reforms are painful but we will have to implement them,” he maintained.

    He said that the government had decided that Pakistan will complete the IMF’s programme for the second time.

    “Pakistan will get $1.2 billion after the approval of IMF’s Executive Board.”

    The Minister of Finance announced that it has been determined to increase the budget of the Benazir Income Support Program (BISP), bringing it to a total of Rs400 billion. This increase is aimed at mitigating the impact of inflation on the most vulnerable segments of society.

    Regarding the declining foreign currency reserves, the minister provided reassurance that efforts are underway to boost them. The minister credited the State Bank of Pakistan (SBP) with managing the situation and noted that support from friendly countries has also been secured through commitments.

    “Pakistan had made big payments to countries during this time, and once the programme is finalised, we will get the amount back,” said Dar.

    The Minister of Finance criticized the previous administration for the credibility gap in the country’s reputation, stating that the lack of trust from the IMF is a result of the previous government’s failure to implement reforms, and even reversing them during a period of political instability.

    “This has negatively portrayed Pakistan’s image and this has affected the recent talks as [the IMF] is not sure if we would agree to it,” he added.

    He added that the government refused to impose sales tax on petrol and the IMF conceded it. “It was mutually agreed that there will be no sales tax on petroleum products,” he said. He added that the general sales taxes will be added to the Rs170 billion.

    Dar said that it is necessary to recover Rs170 billion in taxes within the current fiscal year, within a period of four months.

  • Everything is going alright with IMF, says Ishaq Dar

    Everything is going alright with IMF, says Ishaq Dar

    Finance Minister Ishaq Dar said on Thursday that it is expected that the matters between the government and the International Monetary Fund (IMF) regarding the conclusion of the 9th review of the $7 billion loan program will be settled today.

    “Everything is going alright,” replied the finance minister when asked about the status of the discussions with the visiting IMF delegation. “The final round is currently underway. I have daily meetings with the IMF team and will do so again today,” he added.

    “It is expected matters will be settled today,” Dar said. “We will give you the news very soon.”

    A delegation from the IMF, led by Nathan Porter, has arrived in Islamabad for discussions surrounding the completion of the ninth review. The discussions are set to conclude on the same day.

    The successful completion of the review would result in the disbursement of $1.2 billion from the IMF and also unlock additional funding from friendly nations and other multilateral lenders, which is crucial for Pakistan to avoid default.

    Minister of State for Finance and Revenue Aisha Ghaus Pasha informed journalists on Wednesday that the government and the IMF are in close proximity to finalizing the Memorandum of Economic and Financial Policies (MEFP).

    Minister of State for Finance and Revenue Aisha Ghaus Pasha stated that the Memorandum of Economic and Financial Policies (MEFP) would be delivered to Pakistan by the IMF once all issues have been resolved. The Minister noted that significant progress had been made, but added that the IMF was seeking clarification on certain aspects, which the government team is working to address.

    In a written statement, the ministry said the talks with the IMF continued on Wednesday and “focused on fiscal table, financing, etc. There is a broad consensus on the reform actions and measures”.

    Additionally, the mission chief also held a meeting with the finance minister to provide an update on the discussions. “The mission is working on putting it all together and will finalise the MEFP,” stated the finance secretary, who declined to comment on the possibility of extending the scheduled talks in order to reach a staff-level agreement.

    According to Dawn, it is of utmost importance for Pakistan to reach a agreement with the IMF, as the foreign exchange reserves have depleted to a low of $3.09 billion as of January 27th, which is only sufficient to cover 18 days’ worth of imports.

  • Pakistan nears finalisation of IMF loan agreement: Power Minister announces positive progress

    Pakistan nears finalisation of IMF loan agreement: Power Minister announces positive progress

    Power Minister of Pakistan, Khurram Dastgir, announced that the country is close to sealing a deal with the International Monetary Fund (IMF) and that the agreement has been achieved on almost all the issues between the two sides.

    With a $350 billion economy, Pakistan is in need of a crucial installment of $1.1 billion from the IMF to avoid default. However, the IMF has identified a significant gap of approximately Rs900 billion, equivalent to 1 per cent of the country’s Gross Domestic Product (GDP), which has been a hindrance in reaching a staff-level agreement.

    Minister Dastgir reassured that the IMF has not demanded the government to cut its defense budget during his appearance on the Geo News program “Capital Talk” on Monday.

    The Minister stated that instead of cutting the defense budget, the IMF has asked the Energy Division to reduce its losses. The Fund has also emphasized the need for the government to reduce line losses in the northern, southern, and western regions of the country. The Minister emphasized that the IMF has made it clear to Pakistan that the country must establish its financial stability by increasing its tax revenues and reducing losses.

    He also mentioned that the international community is not displaying leniency towards Pakistan since the US withdrawal from Afghanistan. The Minister indicated that the country must take the necessary measures to align its financial position and meet the expectations of the IMF and the international community.

  • Pakistan will have to agree to ‘unimaginable’ IMF conditions for bailout: PM Shehbaz

    Pakistan will have to agree to ‘unimaginable’ IMF conditions for bailout: PM Shehbaz

    The government will have to accept “beyond imagination” International Monetary Fund (IMF) bailout requirements, according to Pakistan’s Prime Minister (PM) Shehbaz Sharif, who made the statement on Friday in a meeting of civil and military leaders in the northwestern city of Peshawar.

    In order to avoid backlash before the upcoming elections in October, the administration has refused to implement the tax increases and subsidy reductions that the IMF has required.

    “I will not go into the details but will only say that our economic challenge is unimaginable. The conditions we will have to agree to with the IMF are beyond imagination. But we will have to agree with the conditions,” PM Shehbaz said.

    In the midst of political unrest, a deteriorating security situation, and a balance of payments crisis caused by its high levels of foreign debt, Pakistan’s economy is in terrible circumstances.

    The nation’s central bank announced Thursday that its foreign exchange holdings had decreased once again to $3.1 billion, which analysts said was just enough to cover imports for fewer than three weeks.

    On Wednesday, year-over-year inflation reached a 48-year high, making it difficult for Pakistanis to afford food products.

    With the possibility of national bankruptcy looming and no friendly countries prepared to give less painful bailouts, Islamabad started to submit to pressure ahead of the IMF visit.

    To manage a rogue illicit market in US dollars, the government relaxed regulations on the rupee, which led to the currency falling to historic lows. Additionally, artificially low gasoline costs have increased.

    A backlog of thousands of cargo containers filled with material the countrycannot afford is accumulating at Karachi port as a result of the government no longer providing letters of credit, with the exception of necessary food and medication.

    IMF advises Pakistan to fetch additional revenue

    The IMF has suggested the Pakistani government implement significant, high-quality, and long-lasting tax and non-tax revenue initiatives in order to raise extra funds to close the anticipated Rs. 600 billion fiscal framework shortfall.

    Currently in Pakistan, an IMF delegation led by Mission Chief Nathan Porter is having discussions for the ninth review, which will go through February 9.

    After months of resistance, the government was finally obliged to agree to all the terms laid forth by the Washington-based lender due to the country’s declining foreign exchange reserves and deteriorating economic circumstances.

    Following the conclusion of the negotiations under the $6.5 billion Extended Fund Facility, a staff-level agreement is anticipated.

  • Intraday update: Pakistani rupee drops to historic low of Rs278.67 against US dollar

    Intraday update: Pakistani rupee drops to historic low of Rs278.67 against US dollar

    After Finance Minister Ishaq Dar authorised a proposal for charity groups to help raise almost $2 billion from overseas Pakistanis, the Pakistani rupee (PKR) fell by over 2.5 per cent against the dollar during intraday trade on Friday, falling as low as Rs278 against the dollar.

    The rupee was trading at Rs278.67 versus the dollar in intraday trade on the interbank market around 12:50 pm, according to the Exchange Companies Association of Pakistan (ECAP).

    The local currency fell by Rs7.32 from its previous day’s closing rate of Rs271.35 to the US dollar.

    The PKR has lost Rs7 or more versus the US Dollar during intraday trade for the third time in a week.

    Bloomberg reports that Pakistani rupee and dollar bonds fell after Prime Minister Shehbaz Sharif said that the International Monetary Fund (IMF) is making life difficult for the country in the ongoing loan negotiations.

    According to information gathered by the US publication, USD/PKR increases 1.8 per cent to a record 275.0250. Bonds that are due in April 2024 were priced at 56.94 cents on the dollar, down 0.3 cents.

    Experts claim that the market is responding to news stories about the demands put forward by the IMF. In the coming days, rupee losses will intensify if Pakistan is unable to reach a staff-level agreement with the Fund.

  • World Bank cuts Pakistan’s GDP growth forecast from 4% to 2%

    World Bank cuts Pakistan’s GDP growth forecast from 4% to 2%

    Due to the unstable economy and floods, the World Bank predicted that Pakistan’s economic growth would drop by half, falling by 4 per cent to 2 per cent, during the current fiscal year.

    According to the Bank’s latest report, “Global Economic Prospects,” Pakistan is experiencing growing economic woes, especially those caused by the recent flooding as well as ongoing policy and political uncertainties.

    “Pakistan faces mounting economic difficulties and Sri Lanka remains in crisis. In all regions, improvements in living standards over the half-decade to 2024 are expected to be slower than from 2010-19,” the World Bank stated in Global Economic Prospects released on Tuesday.

    Pakistan’s currency declined by 14 per cent between June and December, and its national risk premium climbed by 15 per cent over this same time frame due to the nation’s low foreign exchange reserves and rising sovereign risk.

    It went on to say that growth is anticipated to pick up to 3.2 per cent in the fiscal year 2023–24 (FY24), still under previous forecasts, as the country implements policy measures to stabilise macroeconomic conditions, inflationary pressures subside, and reconstruction after the floods gets underway.

    According to the analysis, Pakistan’s recent floods are thought to have cost the country damage equal to 4.8 per cent of GDP.

  • IMF team to visit Pakistan in 2-3 days to finalise ninth review

    IMF team to visit Pakistan in 2-3 days to finalise ninth review

    A delegation from the International Monetary Fund (IMF) will visit Pakistan in two to three days to “undertake and complete” the key ninth review, according to Prime Minister (PM) Shehbaz Sharif.

    PM Shehbaz said that he spoke to IMF Managing Director Kristalina Georgieva and stressed that Pakistan will complete the IMF bailout programme.

    “I told her to ease the terms of the deal because I cannot burden the common man any further. We have imposed taxes on the rich strata of the society. I requested her to send a delegation for the ninth review and she replied that a team will visit Pakistan in 2-3 days.”

    “After inquiring about Pakistan’s relations with China and Saudi Arabia, she also told me that China had urged IMF to support Pakistan,” he said.

    The IMF programme is currently stalled, with experts suggesting that the government is reluctant to implement some of the lender’s conditions over their effect on political capital in a year when elections are scheduled to take place.

    PM Shehbaz said that Pakistan was trying to mend its ties with friendly countries as well. “We should appreciate friendly countries for supporting Pakistan over the past few years but the previous government slapped allegations of corruption on Chinese firms and jeopardised the China-Pakistan Economic Corridor (CPEC).”

    He stated that the former leadership “had angered friendly nations”, adding that the contribution of Saudi Arabia, UAE and China to Pakistan’s economy is priceless.

    Pakistan needs the IMF programme to restart due to its declining rupee, shrinking reserves, and worse macroeconomic indices.

    The State Bank of Pakistan’s (SBP) foreign exchange holdings dropped by another $245 million on Thursday, down to a critically low level of $5.58 billion. Since April 2014, SBP-held reserves have never been this low.

    At the same time, the government has also been unable in obtaining crucial support from allies.

    The challenge has left Pakistani authorities scurrying to set up foreign exchange amid increased concerns over the country’s capacity to pay its debts and fund imports.

    Additionally, there are market rumours that Pakistan could possibly default, but the Pakistani government is still confident that Saudi Arabia would provide essential assistance for the country’s foreign exchange reserves.

  • S&P Global lowers Pakistan’s credit rating to CCC+

    S&P Global lowers Pakistan’s credit rating to CCC+

    Pakistan’s long-term sovereign credit rating was downgraded by S&P Global from “B” to “CCC+” to reflect the continuous deterioration of the country’s external, fiscal, and economic metrics.

    According to S&P, Pakistan’s already meagre foreign exchange reserves would continue to be under pressure through 2023 without a drop in oil prices or an improvement in international aid. The nation also faces significant political risks that could alter its future course of policies.

    According to the report, Pakistan’s economic and fiscal results are predicted to be negatively impacted by this year’s devastating floods, skyrocketing food and energy prices, and rising global interest rates, with refinancing issues over the medium term.

    The agency maintained its outlook at “stable”.

    With barely enough reserves to pay one month’s worth of imports, a dollar shortage, and a delay in its loan programme with the International Monetary Fund, Pakistan is in the midst of an economic catastrophe. Despite the payment of a $1 billion bond this month, long-term dollar bonds continue to trade at distressed prices, reflecting investors’ lack of confidence in Pakistan’s capacity to meet its international debt commitments.

    Following the terrible floods that hit the country earlier this year, Moody’s lowered Pakistan’s sovereign credit rating by one notch, from B3 to Caa1, citing heightened government liquidity and external vulnerability risks.

  • Father of two commits suicide due to poverty

    Father of two commits suicide due to poverty

    A 30-year-old married man who was upset over his poverty and inability to pay back a loan hung himself on Tuesday in the Kahna area, near Lahore.

    According to The News, the victim, identified as Fayaz, was depressed owing to his poor financial situation. Additionally, he had taken on a debt that he was unable to pay back.

    He hung himself in a closed room inside his home on the day of the incident. The father also requested an apology from his kids in a message that he penned.

    Rising inflation

    The growing inflation rate in Pakistan is having an impact on many low-income individuals who are unable to pay for basic essentials including food. Meanwhile, even those with good incomes are struggling to cover their expenses.

    Pakistan’s inflation rate has increased to 26.6 per cent in October 2022 from 23.2 per cent in September, placing it along with Ukraine at the 19th rank out of 184 countries where levels of deflation have been measured by institutions specialising in gathering and tabulating economic data.