Finance Minister Ishaq Dar announced on Friday that under the agreement with the International Monetary Fund (IMF), new taxes worth Rs 170 billion will have to be imposed, for which a mini-budget will have to be introduced.
Dar was addressing a press conference after the IMF mission left Pakistan without signing the staff-level agreement, which the country was relying on to revive its failing economy.
The finance czar’s address came shortly after the IMF released a briefing on its talks with Pakistan, which said virtual talks would continue to finalize implementation of key priorities.
Despite failing to reach an agreement with the IMF, the finance minister claimed that talks with the global lender ended “positively”.
He confirmed that the government has received a draft Memorandum of Economic and Financial Policies (MEFP) from the international lender related to the completion of the ninth review of the $7 billion loan programme.
“I am confirming that the draft MEFP was received by us at 9 am today,” he said.
The draft MEFP is a prerequisite to pave the way for the implementation of the Staff Level Agreement. It can be considered as the basis for decisions reached between Pakistan and the Fund as it includes policy measures and structural standards agreed upon by both parties.
What did the IMF say?
In his briefing, IMF mission chief Nathan Porter said “virtual discussions” between the two sides would continue in the coming days to finalize the “implementation details” of the policies.
Porter said that for Pakistan to successfully restore economic stability and drive sustainable development, timely and decisive implementation of policy measures along with committed financial support from government partners is critical.
The statement welcomed Prime Minister Shehbaz Sharif’s commitment to implementing policies that are necessary to “protect macroeconomic stability”.
He also thanked the authorities for participating in “constructive dialogue”.
Porter noted that “considerable progress” has been made in discussions with Pakistani officials on policy measures to address domestic and external imbalances.
The head of the IMF mission highlighted that “key priorities include strengthening the fiscal position with sustainable revenue measures and reducing untargeted subsidies, social protection to support the most vulnerable and flood-affected.” Allowing the exchange rate to be fixed in the market to gradually eliminate the foreign exchange deficit; and by preventing further accumulation of circular debt and ensuring the viability of the energy sector. Increasing supply.”
Virtual meeting with IMF on Monday
After confirming that Pakistan had received the draft MEFP, Minister Dar said a virtual meeting would now be held with the Washington-based lender to take matters forward.
He said that the government and its economic team are struggling to finalize the agreement with the IMF.
At the start of his media talk, the Finance Minister gave a reminder that the government is implementing the program signed by former Prime Minister Imran Khan with the IMF in 2019-2020. He reiterated that the Shehbaz Sharif-led government was negotiating the deal as a “sovereign commitment”.
“This is an old contract that was previously suspended and delayed,” he noted.
Moving on to Pakistan’s talks with the IMF mission, the finance minister said the 10-day talks were wide-ranging and covered the power and gas sectors and the fiscal and monetary aspect.
“The State Bank Governor and officials from various departments and ministries participated in the talks,” Dar said.
Focus on minimizing untargeted subsidies: Dar
The finance minister announced that new taxes worth Rs 170 billion will be levied to restore credit facilities and energy sector reforms will be implemented. He also said the government was focusing on “reducing untargeted subsidies”.
The finance minister said that some of the reforms suggested by the IMF are in favor of Pakistan.
Dar emphasized that reforms are needed in Pakistan, adding that the Prime Minister has assured the IMF that the government will implement them.
“Government will prevent spiraling debt in power and gas sectors,” Dar said.
