Pakistan finance minister hopeful of IMF deal within a day or two

Pakistan's finance minister Miftah Ismail on Monday said that the stalled assistance package of the IMF would be revived within one or two days.

Cash-strapped Pakistan has faced growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.

The Pakistani rupee remained highly volatile as it plunged to a record low of over Rs 211 against the US dollar in the inter-bank market on Monday.

Pakistan's foreign exchange reserves have depleted to a critical level and the country has less than six weeks of import cover remaining. The reserves are currently below USD 9 billion.

The country is fulfilling the prerequisite conditions to revive the IMF loan programme to avoid default on international payments.

Ismail, speaking to journalists after a meeting of the Senate Standing Committee on Finance here, said that the government has fulfilled all conditions and the Extended Fund Facility (EFF) would be reached "within one or two days".

The International Monetary Fund (IMF) had agreed in July 2019 to provide USD 6 billion under the Extended Fund Facility (EFF) over a period of 39 months but so far only reimbursed USD 3 billion before putting the package on ice earlier this year.

The current government is bending its back to appease the IMF and in case of being successful, it expects to get USD 1 billion immediately, which will be a huge boost for its dwindling reserves.

Ismail did not rule out more taxes but clarified that such taxes would be imposed on rich people only.

To a question, he said that the fund had no issue with the increase in the salary of the public sector employees.

"The IMF has nothing to do with salaries as long as we have the money," he said, adding that the government will "protect" those earning less than Rs 1.2 million annually.

Pakistan's economic condition remains brittle as it urgently needs foreign exchange to release pressure on rupee which has fallen to 210 against one dollar.

The IMF programme restoration was also essential before Parliament approves the new fiscal year budget before the end of this month. From next month, the new fiscal year will start.

The Dawn news reported that Pakistan and the IMF so far have not yet been able to reach close to a staff-level agreement for revival of the loan programme, leaving authorities in a tight spot to bridge the gap and get the updated federal budget for the fiscal year 2022-23 passed by the National Assembly.

The authorities in the finance ministry were expecting to conclude the staff-level agreement by June 19 on the basis of revenue and expenditure measures that could deliver next year's primary budget (the difference between revenues and expenditures, excluding interest payment) in a Rs 152 billion surplus.

However, the IMF staff still has reservations over Rs 9.5 trillion expenditure projected by the authorities for the next fiscal year.

The revenue measures in the budget, according to the IMF estimates, are also insufficient to deliver slightly over Rs 7 trillion target.

A top finance ministry official confirmed on Sunday that they had not yet received the first draft of memorandum of economic and financial policies from the IMF as targeted earlier because certain matters remained unsettled.

“We are working very closely with the IMF and will soon reach some conclusion,” the official said.

Meanwhile, diplomatic sources say the US has agreed to help Pakistan negotiate a deal with the fund, the report said.

Ismail last week met the US ambassador in Pakistan and sought his country's support for the revival of the IMF programme.