Tag: SBA

  • IMF to continue talks on Pakistan’s economic reform goals

    IMF to continue talks on Pakistan’s economic reform goals

    The International Monetary Fund (IMF) remains engaged in discussions with Pakistan on policy goals and actions to establish a medium-term, home-grown reform programme that could be supported under the Extended Fund Facility (EFF) arrangement.

    Julie Kozack, Director of the Communications Department at the IMF, highlighted this in a recent press briefing. She emphasised that the reform programme under consideration aims to enhance economic credibility through the consistent application of sound policies.

    The objective is to transition Pakistan from economic stabilisation to robust, inclusive, and resilient growth, ultimately improving the living standards of the Pakistani people.

    The IMF also noted significant progress towards a staff-level agreement with Pakistan.

    Addressing a query about the recent mission to Pakistan, Kozack stated, “Since our mission to Pakistan from May 13 to May 23, our staff has visited Islamabad. We will continue to discuss policy goals and actions that could form the basis of a medium-term, home-grown reform programme for Pakistan that could be supported under the EFF arrangement with the IMF.”

    Regarding the prior actions and the 2024-25 budget, she mentioned that discussions between the IMF team and Pakistani authorities are ongoing and that further information would be communicated in due course.

    Kozack further elaborated on the 2023 Stand-by Arrangement (SBA) for Pakistan, explaining that its goal is to return to stability and to maintain, broaden, and extend this stability to establish a foundation for sustainable growth.

  • Pakistan proposes Rs300 billion cut in govt expenditures to IMF

    Pakistan proposes Rs300 billion cut in govt expenditures to IMF

    Pakistan has presented a comprehensive plan to the International Monetary Fund (IMF) aimed at reducing government expenditures by Rs300 billion in the next fiscal year, including a stringent ban on development schemes. 

    According to sources cited by ARY News, this cost-cutting strategy includes several significant measures. One of the key components is the cessation of establishing new universities by the federal government, with provincial governments expected to bear the responsibility of funding existing universities under their jurisdiction.

    Additionally, a new contributory pension scheme will be introduced for all government departments, excluding defence and police personnel. This move aligns with the IMF’s recommendation for Pakistan to overhaul its pension system.

    The sources also mentioned the possibility of a complete ban on development schemes funded by parliamentarians in the next fiscal year. Moreover, the federal government will cease funding ongoing projects that are in cooperation with provincial governments.

    Another notable measure under consideration is the elimination of positions from grade 1 to 16 that have been vacant for over a year, further contributing to the reduction in government expenditure.

    The IMF has urged Pakistani authorities to impose taxes on monthly pensions exceeding Rs100,000 as part of the stringent economic reforms required for the new loan programme. The proposed reforms also include legislation aimed at taxing wealthy pensioners to secure the financial aid.

    These proposed measures are a part of Pakistan’s efforts to meet the IMF’s demands and secure the much-needed financial support to stabilise its economy.

  • IMF team set to visit Pakistan to discuss new programme before budget finalisation

    IMF team set to visit Pakistan to discuss new programme before budget finalisation

    An International Monetary Fund (IMF) mission is set to visit Pakistan in May to discuss a potential new financial programme, the IMF announced on Sunday.

    This visit comes as the Pakistani government begins crafting its annual budget for the next financial year with the aim of stabilising the economy and implementing necessary reforms.

    The announcement follows the completion of a short-term $3 billion programme last month, which helped Pakistan avoid a sovereign default.

    Prime Minister Shehbaz Sharif’s government is now seeking a more comprehensive and longer-term agreement with the IMF to ensure sustained economic recovery and growth.

    “A mission is expected to visit Pakistan in May to discuss the FY25 budget, policies, and reforms under a potential new programme for the welfare of all Pakistanis,” the IMF stated in an email response to Reuters.

    However, the exact dates of the visit and the specifics of the programme were not disclosed.

    Pakistan’s fiscal year runs from July to June, and the budget for fiscal year 2025 must be presented before June 30.

    The IMF emphasised the importance of accelerating reforms, stating that the size and duration of the new programme would be determined by the reform package and the country’s balance of payments needs.

    Pakistan’s economy, which is valued at around $350 billion, has shown signs of stabilisation following the last IMF programme, with inflation decreasing from a record high of 38 per cent in May 2023 to about 17 per cent in April 2024.

    However, the country still faces significant fiscal challenges and a high deficit, and growth has stagnated due to strict import controls.

    The current growth rate is expected to be around 2 per cent this year, a slight improvement from the negative growth rate experienced last year.

    In a recent interview with Reuters, Finance Minister Muhammad Aurangzeb expressed optimism about reaching an agreement on a new IMF programme in May. Pakistan is expected to seek at least $6 billion in additional financing from the IMF, including funding under the Resilience and Sustainability Trust.

    The forthcoming IMF visit is crucial for Pakistan as it prepares its budget and seeks to implement reforms to strengthen the economy.

    The discussions are likely to focus on fiscal discipline, economic growth, and the welfare of all Pakistanis, with an emphasis on achieving long-term stability and sustainability.

  • Pakistan receives final installment of IMF’s $3 billion SBA

    Pakistan receives final installment of IMF’s $3 billion SBA

    Pakistan has received the final tranche of $1.1 billion from the International Monetary Fund (IMF) as part of its $3 billion Stand-By Arrangement (SBA), the State Bank of Pakistan (SBP) announced on Tuesday.

    The disbursement follows the IMF’s successful completion of its final review of Pakistan’s economic reform programme supported by the 9-month SBA.

    The SBP said in its statement that the Special Drawing Rights (SDR) of 828 million, equivalent to approximately $1.1 billion, had been received on April 29, 2024, and would be reflected in the central bank’s foreign exchange reserves for the week ending May 3, 2024.

    As of April 19, the central bank’s foreign exchange reserves stood at $7.981 billion.

    Prime Minister Shehbaz Sharif welcomed the latest disbursement, stating that it would contribute to greater economic stability in Pakistan.

    He highlighted that the SBA was critical in preventing the country from defaulting on its external liabilities. 

    Pakistan’s government is now focused on securing a larger and longer Extended Fund Facility (EFF) to achieve sustained macroeconomic stability.

    The prime minister has already signalled his intention to pursue another IMF programme to ensure the continuity of economic growth and fiscal discipline.

    On Sunday, Prime Minister Shehbaz Sharif met with IMF Managing Director Kristalina Georgieva on the sidelines of the World Economic Forum Special Meeting in Saudi Arabia.

    During the meeting, the prime minister reiterated his government’s commitment to implementing structural reforms, maintaining strict fiscal discipline, and following prudent policies that would support macroeconomic stability and sustainable economic growth.

    Pakistan is seeking additional support to maintain the economic gains made during the current SBA and to continue its positive economic growth trajectory.

  • Critical IMF meeting scheduled for April 29 to approve $1.1 billion for Pakistan

    Critical IMF meeting scheduled for April 29 to approve $1.1 billion for Pakistan

    The Executive Board of the International Monetary Fund (IMF) is scheduled to meet on April 29 to deliberate on the approval of a $1.1 billion funding tranche for Pakistan.

    This amount represents the final installment of a $3 billion stand-by arrangement (SBA) with the IMF that is due to expire this month.

    The anticipated funding comes at a critical time for Pakistan’s economy, which has been struggling with a chronic balance of payments crisis.

    The country has nearly $24 billion in debt and interest repayments due over the next fiscal year, which is approximately three times more than its central bank’s foreign currency reserves.

    Meanwhile, Pakistan’s Finance Minister, Muhammad Aurangzeb, has indicated that the government is seeking a new long-term, larger loan from the IMF. Discussions are underway, with a staff-level agreement expected by early July.

    Islamabad is reportedly aiming for a multi-year agreement to promote macroeconomic stability and implement long-overdue structural reforms. However, the finance minister has not disclosed the exact loan size Pakistan is seeking.

    If approved, this would mark the 24th IMF bailout for Pakistan. The ongoing negotiations reflect the country’s continued reliance on international financial assistance to navigate its economic challenges.

    Pakistan’s economy is projected to grow by 2.6 per cent in the current fiscal year ending in June, according to the finance ministry.

    Despite this modest growth, the country continues to face high inflation, which is expected to average around 24 per cent this fiscal year, down from a record high of 38 per cent in May 2023.

    As Pakistan navigates these economic hurdles, securing the final tranche of the IMF’s stand-by arrangement and potentially a new loan agreement could provide much-needed relief and lay the groundwork for longer-term stability.

  • Pakistan anticipates final IMF tranche approval in late April

    Pakistan anticipates final IMF tranche approval in late April

    The International Monetary Fund (IMF) announced that its Executive Board meeting, anticipated for late April, is crucial for approving Pakistan’s final tranche of approximately $1.1 billion (SDR 828 million). 

    This sum represents the last portion of the $3-billion Stand-By Arrangement (SBA) initiated in June of the previous year.

    Julie Kozack, IMF Communication Director, revealed this information during a media briefing, highlighting the significance of the staff-level agreement reached on March 19 between IMF staff and Pakistani authorities. 

    This agreement, subject to approval by the IMF’s Executive Board, acknowledges Pakistan’s strong program implementation by the State Bank of Pakistan (SBP) and the interim government, as well as the new government’s commitment to ongoing policy and reform endeavors aimed at transitioning Pakistan from stabilisation to robust, sustainable recovery.

    Kozack emphasised the improvement in Pakistan’s economic and financial position since the completion of the first review, with growth and confidence steadily rebounding. 

    Looking ahead, she mentioned the possibility of a successor IMF-supported program to address Pakistan’s fiscal and external stability challenges and foster inclusive growth, indicating the IMF’s readiness to engage in discussions with Pakistani authorities.

    Meanwhile, Pakistan’s foreign exchange reserves witnessed a modest increase, reaching $8.04 billion as of March 29, although still considered low for an import-dependent economy, raising concerns about potential future pressure. 

    Finance Minister Muhammad Aurganzeb has acknowledged the need for another IMF bailout, with discussions slated for the upcoming Spring meetings of the Board of Governors of the World Bank Group and IMF scheduled for April 15-20, 2024, in Washington DC, where Aurangzeb is expected to lead Pakistan’s delegation.

  • IMF urges Pakistan to expand capital gains tax scope to include cryptocurrencies

    IMF urges Pakistan to expand capital gains tax scope to include cryptocurrencies

    The International Monetary Fund (IMF) has advised the Federal Board of Revenue (FBR) to broaden the scope of capital gains tax (CGT) by incorporating cryptocurrencies into the tax regime.

    This recommendation arises amidst ongoing discussions between the Fund and Pakistani authorities regarding the $3 billion stand-by arrangement (SBA).

    The four-day review, which commenced on Thursday, aims to unlock the final tranche of approximately $1.1 billion secured by Islamabad under a last-minute rescue package last summer, thus averting a sovereign debt default.

    During these deliberations, the IMF proposed a reassessment of tax slabs for real estate and listed securities to ensure comprehensive taxation of all gains, irrespective of asset holding periods.

    Moreover, the IMF urged the FBR to mandate property developers to monitor and report all pre-completion property transfers, with penalties for non-compliance. This move aims to bring under the tax umbrella the prevalent practice of trading property plot files within housing schemes.

    These recommendations are anticipated to be incorporated into the forthcoming bailout package under the Extended Fund Facility (EFF), potentially becoming integral to the FY2024–25 budget through the finance bill.

    The IMF’s technical assistance report highlights the challenges faced by Pakistani authorities in assessing and collecting taxes on capital gains from real estate transactions, particularly those occurring before formal property registration.

    To address this issue, the IMF suggests obligating property developers to track and report all pre-completion property transfers, with penalties for non-compliance, thereby shifting tax liabilities to developers if they are not recoverable from the initial transferor.

    Furthermore, the IMF advocates for the expansion of assets subject to capital gains tax to include emerging investment avenues such as cryptocurrencies alongside real estate and listed securities. 

    It also proposes revising tax slabs to ensure equitable taxation of capital gains, irrespective of asset holding durations.

    Overall, these IMF recommendations seek to fortify the taxation framework, ensuring a more inclusive and equitable approach to capital gains taxation in Pakistan.

  • Pakistan expected to sign IMF agreement this week

    Pakistan expected to sign IMF agreement this week

    Pakistan is poised to finalise a staff-level agreement with the International Monetary Fund (IMF) this week.

    The anticipated agreement with the IMF is expected to pave the way for Pakistan to receive the final installment of $1.1 billion under the SBA agreement.

    Additionally, it has been reported that Pakistani officials, in discussions with the IMF, have pledged to implement an increase in electricity tariffs effective July 1. Moreover, consumers will bear periodic fuel adjustments on a monthly, quarterly, and annual basis for cost recovery purposes.

    Highlighting the imperative of safeguarding beneficiaries enrolled in the BISP programme, the IMF delegation emphasised to Pakistani authorities the importance of maintaining stringent monetary policies and stable market exchange rates.

    The ongoing visit of the IMF delegation to Pakistan pertains to the second review under the SBA loan programme.

    In an earlier development, sources revealed that the Pakistani government rebuffed the IMF’s request to revisit the National Finance Commission (NFC) Award. 

    The IMF had urged Islamabad to reconsider the NFC Award allocation with the provinces during the second review talks within the framework of the $3 billion loan programme under the SBA, citing a shortfall in federal funds.

  • IMF mission holds crucial talks with FinMin Aurangzeb on $3 billion SBA

    IMF mission holds crucial talks with FinMin Aurangzeb on $3 billion SBA

    In a pivotal meeting held on Thursday, Pakistan’s Finance Minister, Muhammad Aurangzeb, engaged in discussions regarding structural reforms and the viability of the energy sector with the visiting International Monetary Fund (IMF) mission.

    The mission’s visit is part of the second review process of the $3 billion Stand-By Arrangement (SBA) established between Pakistan and the international lender.

    Key points of deliberation encompassed various facets of Pakistan’s macroeconomic landscape, including fiscal consolidation efforts by the government, structural reforms, energy sector sustainability, and governance of state-owned enterprises (SOEs).

    Expressing a warm reception, the finance minister underscored the government’s steadfast commitment to collaborating with the IMF to drive forward the reform agenda, aimed at fostering economic growth and bolstering stability across Pakistan.

    During the meeting, Nathan Porter, head of the IMF mission, extended congratulations to Muhammad Aurangzeb on his appointment as the finance minister.

    Anticipations are high that the IMF mission’s visit could culminate in a staff-level agreement regarding the second review of the SBA.

    Since its inception in July 2023, Pakistan has received $1.9 billion out of the allocated $3 billion under the nine-month programme.

    Aurangzeb, articulating the government’s stance, outlined intentions to explore the possibility of acquiring a more extensive and prolonged Extended Fund Facility (EFF) within the IMF framework, with the overarching objective of attaining macroeconomic stability.

    Officials from Pakistan, including Finance Minister Muhammad Aurangzeb and Energy Minister Musadik Malik, apprised the IMF team of the concerted efforts undertaken to implement the prescribed reforms, including the adjustment of energy tariffs.

    An official from the Finance Division, speaking on anonymity, disclosed the IMF’s acknowledgment of Pakistan’s strides in meeting quarterly programmeme targets under the SBA.

    Simultaneously, discussions are underway to chart the trajectory of the subsequent programmeme, with deliberations leaning towards a more extensive endeavour valued at approximately $8 billion.

    Minister Malik elaborated on the government’s energy reform agenda, highlighting recent adjustments in electricity and gas prices aligned with the stipulated schedule.

    The recent levy hike on petrol and diesel, coupled with the augmentation of gas tariffs for domestic consumers, underscores Pakistan’s commitment to fulfilling key conditions outlined in the IMF’s final review.

    Economic analysts anticipate a seamless final review process, citing Pakistan’s commendable adherence to the IMF’s performance targets as a harbinger of success.

  • SBP sees surge of over $17 million in forex reserves

    SBP sees surge of over $17 million in forex reserves

    The latest data released by the State Bank of Pakistan (SBP) revealed a notable rise in the country’s foreign exchange reserves. During the week ending March 8, 2024, SBP’s reserves increased by $17.2 million, marking a 0.22 per cent growth, reaching a total of $7.91 billion.

    Additionally, Pakistan’s overall reserves experienced a surge, ascending by $131.3 million, or 1.01 per cent, week-on-week (WoW), to a sum of $13.15 billion. This increase was further complemented by a rise in reserves held by commercial banks, which climbed by $114.1 million, or 2.23 per cent, to reach $5.24 billion.

    In a significant development, the second review of the stand-by arrangement (SBA) with the International Monetary Fund (IMF) is slated to take place from March 14 to 18, 2024. This review holds particular importance as it marks the final assessment under the SBA. Upon reaching a staff-level agreement, the final tranche of $1.1 billion will be disbursed, subject to approval by the Executive Board of the IMF.

    It is noteworthy that in the current fiscal year, Pakistan has witnessed a substantial increase in its total liquid foreign reserves, amounting to $3.99 billion, or 43.57 per cent. Similarly, the ongoing calendar year has seen a rise of $0.48 billion, or 3.77 per cent.