Government compromises on IMF conditions.
According to reports, the government proposed a reduction in spending of Rs200 billion and an increase in taxes of Rs100 billion.
ISLAMABAD:
Friday, Islamabad offered changes to the budget and immediately lifted limitations on imports in an effort to resolve issues between Pakistan and the International Monetary Fund (IMF).
The Express Tribune quotes anonymous sources as saying the administration has informed the IMF it is open to make changes to the country’s budget and tax system. They noted that while the offer was just about 0.3% of GDP, it was roughly half of the gap that the international lender had identified.
According to the sources, the administration proposed a Rs200 billion cut in spending and a Rs100 billion increase in taxation.
If the current round of negotiations is fruitful, the authorities believe an agreement at the staff level can be achieved as soon as possible. According to the information gathered, things have progressed rapidly since Thursday.
The Treasury Department declined to issue a statement on the matter.
The talks didn’t wrap up until after midnight as the IMF requested more changes from Pakistan. Pakistan’s offer was probably around Rs300 billion, based on estimates of the size of the economy for the upcoming fiscal year, though this was not possible to confirm.
If differences between the IMF and Pakistan can be resolved, Finance Minister Ishaq Dar may make the necessary adjustments to the budget during his closing speech to the National Assembly. The speech is planned for this coming Saturday.
Under the condition of anonymity, a high-ranking government official stated that Pakistan was now halfway there and needed the IMF to finish the job.
Due to delays in the 9th, 10th, and 11th evaluations of the bailout package, Pakistan has not yet received $2.6 billion of the overall $6.5 billion programme size.
Both Prime Minister Shehbaz Sharif and Finance Minister Dar have stressed that all necessary steps have been taken and that the next $1.2 billion loan tranche should be approved immediately by the IMF.
IMF Managing Director Kristalina Georgieva advised the prime minister over the phone on May 27 that the program will expire on June 30 and could not be extended.
According to the rumors, the IMF has requested that the government once again cancel the amnesty program. The government has proposed a program where foreign nationals can bring in up to $100,000 without answering any questions, which the IMF has called a “damaging precedent.”
Pakistan’s government had suggested new tax exemptions that the IMF had requested be rescinded so that the country could meet its GDP growth target of 3.5% in the coming fiscal year. The IMF head pushed for internal resolution of all policy issues.
According to the cited sources, the planned budget modifications would reduce funds set aside for subsidies and grants. They also mentioned that fresh pink books and the budget-in-brief might be required after these changes were implemented.
The prime minister had earlier stressed that the government was dedicated to meeting its obligations agreed upon with the IMF and that all necessary procedures for the 9th review under the Extended Fund Facility (EFF) had been taken.
On Friday, the State Bank of Pakistan (SBP) reversed course on a six-month-old advise it sent to banks suggesting they limit imports.
In the first 11 months of the current fiscal year, Pakistan’s current account deficit shrank dramatically to $2.9 billion due to administrative limitations put on imports.
According to the IMF, this progress is phony and causes market distortions. The circular issued by the SBP on December 27, 2022, caused friction between Pakistan and the IMF. Pakistan has previously promised to rescind these directives beginning in March of this year, but it has not followed through.
Letters of credit were restricted by the central bank to imports of wheat, edible oil, pharmaceuticals, energy, imports by export-oriented businesses, and agricultural inputs.
According to the sources, the International Monetary Fund (IMF) once again brought up the subject of exchange market distortions, to which the Pakistani government responded that it was not intervening in the currency market.
