Hours after the International Monetary Fund (IMF) issued a statement on its talks with Pakistan, Finance Minister Ishaq Dar said that the parleys with the global lender ended “positively” and the government will have to impose Rs170 billion in taxes through a mini-budget. in order to revive the loan programme.
Addressing the media, the finance minister confirmed that the government had received the draft of the Memorandum of Economic and Financial Policies (MEFP) from the Washington-based lender.
At the start of his media talk, the finance minister reminded that the program that the incumbent government was implementing was the one signed by former prime minister Imran Khan with the IMF in 2019-2020. He reiterated that the Shehbaz Sharif-led government is holding talks on this agreement as a “sovereign commitment”.
“This is an old agreement which had been suspended and delayed earlier,” he noted.
Coming on to Pakistan’s talks with the IMF mission, the finance minister said that the 10-day-long discussions were extensive covering the power, and gas sectors and the fiscal and monetary side.
“The SBP governor and officials from different departments and ministries participated in the talks,” said Dar.
Sharing broad contours of the understanding reached with the IMF, the finance minister said taxation measures of Rs170 billion will be taken as opposed to the rumors of Rs700-800 billion.
Ishaq Dar said reforms in the energy sector will be implemented and the main thrust of it is to check the flow of the circular debt. He said the circular debt in the gas sector will be brought to zero while untargeted subsidies will be minimised.
The finance minister said that some of the reforms suggested by the IMF are in Pakistan’s favour.
Dar emphasized that reforms are needed in Pakistan, adding that Prime Minister Shehbaz Sharif has assured the IMF that the government would implement them.
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 finmin said that the economy is bleeding and now it’s ranked at 47.
He blamed those who misgoverned and mishandled leading to economic devastation, urging that it needed to be fixed.
Talking about the power sector, Dar said that Rs3,000 billion are spent on electricity generation but its recovery is just Rs1,800 billion.
“Even though these reforms are painful but we will have to implement them,” he maintained.
He said that the government had decided that Pakistan would complete the IMF’s program for the second time.
“Pakistan will get $1.2 billion after the approval of IMF’s Executive Board.”
He said it has been decided to increase the budget of the Benazir Income Support Program (BISP) by Rs40 to Rs400 billion in order to reduce the burden of inflation on the most vulnerable segments of society.
On the depleting forex reserves, the minister assured that they will be boosted. He said that the State Bank of Pakistan (SBP) is managing it, adding that there are some commitments made by friendly countries.
“Pakistan had made huge payments to countries during this time, and once the program is finalised, we will get the amount back,” said Dar.
Dar blamed the previous government for the credibility gap, saying that the IMF doesn’t trust Pakistan as not only the country failed to implement the reforms but reversed them at the time of the no-confidence motion.
“This has negatively portrayed Pakistan’s image and this has affected the recent talks as [the IMF] am 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 granted it. “It was mutually agreed that there will be no sales tax on petroleum products,” he said. He added that the general sales tax will be added to the Rs170 billion.
Dar said that the Rs170 billion in taxes will have to be recovered within four months in this fiscal year.
