Tag: ninth review

  • Finance Ministry responds to IMF’s concerns on budget, pledges commitment to programme

    Finance Ministry responds to IMF’s concerns on budget, pledges commitment to programme

    The International Monetary Fund (IMF) has publicly raised reservations regarding Pakistan’s budget, prompting a response from the Finance Ministry. The ministry clarified that the budget is not part of the pending ninth review, which has been delayed since November of last year. However, it emphasised its commitment to finding an amicable solution through ongoing engagement with the IMF.

    In a statement addressing the IMF’s concerns, the ministry highlighted the completion of the ninth review in early February 2023, with all technical issues promptly addressed. The only outstanding matter was external financing, which was resolved after discussions between Prime Minister Shehbaz Sharif and the IMF managing director.

    The ministry clarified that although the FY24 budget was not part of the ninth review, it shared the budget numbers with the IMF mission in line with the prime minister’s commitment. Continuous engagement with the IMF, including discussions on the budget, is ongoing.

    Addressing the IMF’s concerns about broadening the tax base, the ministry noted the addition of 1,161,000 new taxpayers by the Federal Board of Revenue (FBR) over the past 11 months. It emphasised that efforts to expand the tax base will continue, highlighting the introduction of a 0.6 per cent advance adjustable withholding tax on cash withdrawals over Rs50,000 as a significant step.

    The ministry defended the tax exemptions announced in the budget, describing them as catalysts for growth in the real sectors of the economy. It assured that the budget provides targeted subsidies for families with a PMT scorecard of up to 40, not limited to the Benazir Income Support Programme (BISP) beneficiaries.

    Regarding the amnesty measures, the ministry explained that the only change made was to “dollarize” the value of an existing provision in the IT Ordinance. It clarified that this facility has always been available and that the cap of Rs10 million ($100,000 approximately) introduced in FY2016 is being resolved based on the rupee equivalent of $100,000.

    The ministry reiterated its full commitment to the IMF programme and eagerness to at least complete the ninth review. It emphasised the government’s willingness to make difficult decisions and engage with the IMF to find an amicable solution.

  • ‘When will Pakistan meltdown?’ Question shocks Pak minister, might approach China for help

    ‘When will Pakistan meltdown?’ Question shocks Pak minister, might approach China for help

    Pakistan is actively exploring alternative measures to prevent a full-fledged eruption of its balance of payment crisis, as the International Monetary Fund (IMF) continues to prolong the revival of the already-delayed $6.5 billion bailout programme.

    According to The News, Pakistan may have no choice but to turn to China to devise a mechanism for rescuing its ailing economy.

    “Amid the deepening political and economic crisis in the country, the IMF has adopted a wait-and-see policy, but this approach cannot be sustained indefinitely,” sources informed the publication. “Either the IMF programme must be revived through the completion of the ninth review, or the programme will be abandoned. We will not share any further data with the IMF until the ninth review is completed,” the sources asserted.

    Multiple reports indicate that Pakistan has already urged the Fund staff to conclude the review, warning that the budgetary framework for 2023-24 will not be shared otherwise.

    Sources recounted an incident where a diplomat from a Western capital questioned a minister about the expected economic meltdown in Pakistan. “This direct question from the dignitary shocked the minister, who assured the visiting diplomat that Pakistan would never default,” the sources narrated.

    It is noteworthy that the diplomatic community has also begun inquiring about “domestic political affairs.”

    Considering these developments, independent economists are now recommending that the government make last-ditch efforts to revive the IMF programme or turn to China for a potential bailout to support the struggling economy.

    Renowned economist Dr Hafiz A Pasha, a former finance minister, expressed that if the IMF fails to make progress, Pakistan would have no alternative but to request China’s assistance in devising a mechanism to avert a full-fledged crisis. He suggested utilizing the Asian Infrastructure Investment Bank (AIIB) as a potential instrument to aid Islamabad in navigating the balance of payment crisis, acknowledging that it falls outside the AIIB’s mandate but emphasizing the need for an institution to assume the role of an Asian IMF.

    When approached, Dr Khaqan Najeeb, a former finance ministry adviser, acknowledged the efforts taken by the country to achieve macro stabilization and pave the way for the completion of the ninth review. However, he pointed out the IMF’s cautious stance due to Pakistan’s weak State Bank reserves, which currently stand at just $4.38 billion, and the precarious balance of payment position. The IMF is taking extra care to ensure that financing needs are more than adequately met, despite efforts by authorities to convince the lender in this regard.

    Dr Najeeb also highlighted the relaxation of imports, with the IMF keen for Pakistan to build reserves and ease administrative restrictions. Notably, Pakistan’s imports in April (year-on-year) have been halved to $2.9 billion, as reported by the Pakistan Bureau of Statistics.

    “The advisable solution is for the IMF to show consideration, as a staff-level agreement can facilitate commercial and multilateral inflows,” Najeeb commented, adding that Pakistani authorities could do more to ensure a robust financing plan.

    He concluded that if an agreement is not reached, the country would have to persist with heightened import restrictions, a constrained economy, and borrowing and rollovers from friendly countries wherever possible. “This is not Pakistan’s preferred option to sustain a thriving economy,” he emphasised.

  • IMF rejects Pakistan’s circular debt management plan, advises raising power tariff

    IMF rejects Pakistan’s circular debt management plan, advises raising power tariff

    In order to cap the extra subsidy at Rs335 billion for the current fiscal year, the International Monetary Fund (IMF) has rejected the circular debt management plan (CDMP) that the government had given and requested the authorities to hike the power tariff by Rs12.50 per unit.

    Talks on the ninth review are now being held in Pakistan by an IMF team; they will last until February 9 and are anticipated to result in a staff-level agreement between the two parties.

    During the second day of technical discussions, the Washington-based lender referred to the amended CDMP as “unrealistic,” which is based on several incorrect assumptions. Therefore, the government would need to make further adjustments to its recommended course of action to limit the losses in the cash-strapped electricity industry.

    A fiscal deficit will be worked up between the IMF and the Finance Ministry, and various extra taxing measures will then be finalised through the forthcoming mini-budget.

    The international lender has asked Pakistan to impose Rs600–800 billion in additional taxes in the second round of talks to revive the $7 billion Extended Fund Facility (EFF), which has been stalled for months.

    According to details, the Federal Board of Revenue held a second round of technical talks with the IMF mission, led by Mission Chief to Pakistan Nathan Porter, on the ninth review of a $7 billion loan programme.

    The lender also demanded the government increase tax collection to 1 per cent of the gross domestic product (GDP). Sources claimed that the fund demanded the government fix the next fiscal year’s tax collection target at Rs8.3 billion.

  • Nearing default and lying about phone calls? Not good Pakistan, says IMF

    Nearing default and lying about phone calls? Not good Pakistan, says IMF

    The International Monetary Fund (IMF) stated on Sunday that Managing Director Kristalina Georgieva and Prime Minister Shehbaz Sharif spoke on the latter’s request, a claim that suggests Islamabad has continued to engage in politics while being on the verge of default.

    “The call took place in response to a request by the Prime Minister of Pakistan to discuss the International Conference on resilient Pakistan,” Esther Perez, the resident representative of the IMF told The Express Tribune.

    On Friday, the PM’s office issued an official handout stating that “the IMF managing director phoned premier Shehbaz on the phone” following his address at the Hazara Electric Supply Company’s (HAZECO) inaugural ceremony. The PM had also stated in his address that the managing director of the Fund had called him.

    As the country makes dubious claims of strength and has just $4.5 billion in foreign exchange reserves, it appears that the administration is still not ready to change its ways.

    Only three weeks’ worth of imports may be covered using the remaining funds. Pakistan has paid back $8.5 billion in debt during the past three months (January through March). Included in this is a $2 billion loan to the UAE for which the government is attempting to obtain a rollover.

    Given the long-standing animosity between the two parties, such factually erroneous claims might make it harder for Pakistan to persuade the IMF.

    Due to its propensity to make pledges while receiving a loan tranche but then break them after the tranche has been released, the country has had a rough history with the IMF. This has led to a significant gap.

    A spokesperson of the IMF in a statement to the media also said that “the Managing Director had a constructive call with Prime Minister Sharif in the context of the International Conference on Resilient Pakistan to be held in Geneva on Monday, January 9.”

    The MD once more conveyed her sympathies to those who were directly impacted by the floods, and it was also said that she backed Pakistan’s attempts to create a more robust recovery.

    Additionally, the PM asserted on Friday that an IMF delegation will visit Pakistan in a matter of two to three days.

    “I asked her to send an IMF team for the completion of the pending 9th review of the programme so that the next loan tranche is released. She assured that the mission will visit [Pakistan] in the next two to three days,” Shehbaz had said.

    However, in its statement to the media, the IMF spokesperson said that the IMF “delegation is expected to meet with Finance Minister Ishaq Dar on the sidelines of the Geneva conference to discuss outstanding issues and the path forward”.

    The self-claimed deadline, which ends on Monday, for the 9th review mission’s arrival in Pakistan was not mentioned in the statement.

    On Saturday, it was revealed that due to significant debt repayments, Pakistan’s official foreign exchange reserves have for the first time dropped to a perilous level of $4.5 billion.

    The sources in the finance ministry also stated that no dates for the IMF review mission had been decided upon as of the PM’s address.

    Additionally, the prime minister said that Georgieva had asked if Saudi Arabia and China were aiding Pakistan.

    After thereafter, Pakistan’s interior minister Rana Sanullah said that even foreign countries won’t assist without the IMF’s protection.

    “If we back out from these [IMF] conditionalities, then our economic survival will become next to impossible and even our friendly countries cannot extend financial help to us,” Sanaullah had said in Faisalabad.

    The interior minister had said that if the current administration tried to adhere to the strict requirements of the IMF, inflation would soar, prices would soar, and the economy would suffer.

    Since the 9th review negotiations between Islamabad and the Fund have not concluded as of yet, a $1.1 billion loan tranche has been withheld.

    In order for the World Bank and the Asian Infrastructure Investment Bank (AIIB) to disburse their funds, Pakistan is eager to finish the ninth review.

    Disagreements about import restrictions, currency rate regulations, demands for the imposition of more taxes, and raising energy costs to pay off over Rs500 billion in circular debts have caused the discussions to be postponed.

  • 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.

  • IMF expected to reach staff-level agreement with Pakistan soon

    IMF expected to reach staff-level agreement with Pakistan soon

    The country representative for the International Monetary Fund (IMF), Ester Perez, has called the conversations with the Pakistani government regarding the ninth review “productive.”

    “Discussions have enabled a revision to the macroeconomic outlook post floods as well as an in-depth evaluation of fiscal, monetary, exchange rate, and energy policies adopted since the completion of the combined seventh and eighth reviews,” said Perez.

    The chief of the IMF in Pakistan stated that the international lender is eager to continue discussions about policies that effectively address the requirements for assistance and recovery after the floods while also maintaining external and fiscal sustainability based on the available resources.

    Furthermore, a senior member of the Pakistani administration told The News that the IMF negotiations were doing well and that a staff-level agreement will likely be reached soon.

    The ninth review was scheduled for November 3, 2022, according to the IMF seventh and eighth review documents, which were published on the website at the end of September 2022.

    After discussions with Pakistani officials that ended on November 18, 2021, the executive board approved the sixth review on February 2, 2022. This delay was brought on by the inability to meet the ‘prior’ conditions.

    The proposed dates for the seventh and eighth reviews were set for March 4 and June 3, respectively, in the staff report that was made public following the approval of the sixth review. However, after talks that ended on May 25, 2022, the IMF executive board accepted the seventh and eighth reviews under the EFF on August 29. This delay was once again caused by the failure to meet the ‘prior’ standards.