ISLAMABAD: Negotiations between Pakistan and the International Monetary Fund (IMF) began on Tuesday to sign a staff-level agreement on the ninth review under the $7 billion Extended Fund Facility (EFF). .
Finance Minister Ishaq Dar leads the Pakistani side while Nathan Porter heads the IMF’s review mission as the cash-strapped country renewed efforts to complete the pending ninth review.
The IMF review mission reached Islamabad on Monday.
JEE News reported earlier today that the government is expected to share its plans for additional tax measures with the visiting review mission.
Analysts have termed the technical-level talks as “the most difficult” as the fund has refused to relax the conditions set for reviving the debt facility.
Pakistan is in the grip of a major economic crisis, with the falling value of the rupee, rising inflation and energy shortages. Prime Minister Shehbaz Sharif protested for months against the IMF’s tax hikes and subsidy cuts, fearing a backlash ahead of elections in October.
But in recent days, with national bankruptcy looming and no friendly country willing to offer a less painful bailout, Islamabad has begun to bow to pressure.
The government loosened controls on the rupee to curb a growing black market in the US dollar, a move that sent the currency to record lows. The prices of artificially cheap petrol have also been increased.
“We are at the end of the road,” Abid Hasan, a former World Bank economist, told JEE News.
“If they don’t, the country will definitely default and we will end up like Sri Lanka, which will be worse.”
Sri Lanka defaulted on its debt last year and endured months of food and fuel shortages that sparked protests, eventually forcing the country’s leader to flee abroad and resign.
IMF urged Govt to bridge gap of Rs 600 billion on financial front.
The Washington-based lender is prescribing tougher prescriptions on all fronts of the economy at a time when foreign exchange reserves are steadily falling and have touched a record low of $3.6 billion.
However, the government had already imposed two major conditions, including allowing the rupee to adjust against the dollar and a record hike in petroleum prices ahead of the talks.
The IMF is asking the government to plug the Rs 600 billion gap on the fiscal front through additional tax measures or spending cuts to limit the budget deficit and primary deficit within the required limits.
Differences on the exact fiscal gap remain and both sides will hold talks to reach a consensus on the exact estimates of additional taxation measures through the upcoming mini-budget.
Pakistan and the IMF will hold technical-level talks from today to Friday and then begin policy-level talks to finalize the Memorandum of Monetary and Economic Policies (MEFP) document.
The IMF further demanded that the electricity rates be increased to the extent of Rs 12 50 paisa per unit as Islamabad seems to have agreed to increase the electricity rates by Rs 7 50 paisa per unit.
