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Source: Nanfang Daily Online Edition     time: 2022-07-07 14:41:03

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  IMF sets tough conditions for Pakistan to revive billion loan facility: report

International Monetary Fund, Pakistan economy, Pakistan government, PML-N government, IMF bailout Pa
Image Source : FILE PHOTO

On June 22Pakistan secured a deal with the IMF to restore the stalled USD 6 billion assistance package and unlock doors for financing from other international sources. 

Highlights

  • IMF asked Pakistan to set up an anti-corruption task force to review existing laws
  • The cabinet will gradually increase electricity tariffs, impose petroleum levy among others
  • MEFP will form the basis for the staff agreement that Pakistani authorities will try to achieve

The IMF has set tough preconditions like hiking electricity tariffs and imposing a levy on petroleum products to revive the stalled USD 6 billion bailout package to Pakistan, media reports said on Wednesday, days after the cash-strapped country struck a deal with the global lender on the much-needed loan facility.

The International Monetary Fund has also asked Pakistan to set up an anti-corruption task force to review all the existing laws that were aimed at curbing graft in the government departments, the reports, quoting sources as saying. After implementing the conditions, the IMF would present Pakistan’s request for the approval of the loan tranche and revival of the program to its executive board – a process that may consume another month, the Dawn newspaper reported.

The new conditions set by the IMF include increasing electricity tariffs, the cabinet taking the decision to gradually impose Rs 50 per litre petroleum levy to collect Rs 855 billion, and ending the government’s role in determining the oil prices, The Express Tribune newspaper reported. The demands came amid the government’s decision to seek the National Assembly’s approval on Wednesday to amend the Petroleum Products (Petroleum Levy) Ordinance, 1961.

The law is proposed to be amended to slap a Rs 50 per litre petroleum levy on high-speed diesel, petrol, high octane blending component (HOBC), E-10 gasoline, superior kerosene oil and light diesel. It has also proposed Rs 30,000 per metric tonne liquefied petroleum gas levy. Cash-strapped Pakistan is facing growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.

On June 22, Pakistan secured a deal with the IMF to restore the stalled USD 6 billion assistance package and unlock doors for financing from other international sources. The make-or-break deal was reached following the IMF staff mission and the Pakistani team, led by Finance Minister Miftah Ismail, agreeing on an understanding on the 2022-23 budget after the authorities committed to generating Rs 43,600 crore more taxes and increasing petroleum levy gradually up to Rs 50 per litre, the Dawn newspaper reported.

The extended fund facility package of USD 6 billion was agreed upon in July 2019 for a period of 39 months. So far only half of the promised money has been reimbursed. The revival of the facility will immediately provide access to USD 1 billion, which Pakistan badly needs to buttress its dwindling foreign exchange reserves.

In its draft Memorandum for Economic and Financial Policies (MEFP) document, the IMF has proposed to club the two pending programme reviews – the 7th and 8th – but did not indicate that it would also approve loan tranches of USD 2 billion. The MEFP will form the basis for the staff-level agreement that now Pakistani authorities will try to achieve at the earliest. However, Finance Minister Ismail said Pakistan had received the MEFP document that showed the merger of the seventh and eighth reviews of the bailout programme and the country would receive a USD 1.9 billion loan after their approval.

The Express Tribune quoted sources as saying that in its draft MEFP document, the IMF did not mention increasing the loan tranche size to USD 1.9 billion. The issue of increasing the loan size will now be discussed by both sides. Pakistan urgently needs the revival of the IMF package to revive the confidence of the international community in its economic policy to get investment and access to global lending institutions. 

ALSO READ | Pakistan: Cash-strapped nation secures deal with IMF to restore stalled billion aid

ALSO READ | Ahead of talks with IMF, will Pakistan withdraw subsidy on petroleum products?

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