ISLAMABAD: Pakistani officials have yet to withdraw the proposed cross-fuel subsidy scheme in writing to the International Monetary Fund (IMF), giving the Fund yet another excuse to block a staff-level agreement. . reported on Thursday.
The lender raised objections to the proposal, asking Islamabad to provide details on the implementation of the plan, which was announced without “consultation”.
However, Minister of State for Petroleum Mossadegh Malik dismissed the impression that the subsidy would be a violation of the terms and said the ministry had answered all questions in detail.
The publication, citing an unnamed finance ministry official, reported today that the IMF has not asked in writing to withdraw cross-fuel subsidies.
The fund is believed to be awaiting clarification on the matter and this is one of the reasons for the delay in the deal.
External financing
Meanwhile, top government sources have confirmed to the publication that Pakistan has secured additional external financing assurances of $3 billion from Saudi Arabia and the United Arab Emirates.
In this regard, a formal agreement with KSA was expected to be signed “very soon”.
However, the IMF is not satisfied as it had estimated that the government would have to arrange $5 billion in external financing to meet the requirements by the end of June 2023.
A senior official said, “In the context of poor credit rating and interest rate hike by the Federal Reserve, the IMF considered that Islamabad should seek more foreign loans to manage its weak external position. It will be difficult.” Desperation was growing among the residents of the Q Block (Ministry of Finance) in the Pak Secretariat.
Officials are understood to believe that the IMF should have signed the staff-level agreement long ago. They suspect that the IMF’s delay is a political game with Pakistan and its people.
Pakistani officials are exploring options to get another $1-2 billion from one of the bilateral friends to meet another IMF condition, an official said, but officials declined to be named at this stage. are It may be China or any other Muslim state that may come forward to open the outstanding treaty with Pakistan.
The IMF had asked Pakistan to arrange $6 billion in external financing, which is needed by June to avert a default on the $350 billion economy.
It should be noted that the work on the financing gap of 6 billion dollars was done on the assumption that the current account deficit will be around 7 billion dollars in the current financial year.
While Pakistan has already received $1.3 billion in funds from China, an agreement on additional deposits of $2 billion with KSA is expected soon. Moreover, the United Arab Emirates has also pledged $1 billion in financial aid.
In response to another question, he said a formal agreement on additional deposits of $2 billion by KSA would be signed “very soon”.
The World Bank is yet to confirm the $900 million Asian Infrastructure Investment Bank (AIIB) co-financing Resilient Enterprises for Sustainable Economy (RISE) loan programme, official sources said.
Pakistani officials argued that this would soon materialize as the government has moved towards harmonizing GST on services across all four provinces.
Election funds
Another obstacle in the way of signing the Staff Level Agreement is the requirement of Rs 21 billion to conduct elections in Punjab as per the order of the Supreme Court of Pakistan.
Although, the finance ministry was non-committal about providing additional funds, all developments at the court level are giving ambiguous signals to the Washington-based lender.
Last, but not least, the timeframe of the current IMF program is another conflict that needs to be resolved moving forward. It is due to expire on June 30, 2023, but the ongoing ninth review is yet to be completed.
The 10th review was to be held on February 3, 2023 while the last and final 11th review was to be held on May 3, 2023 i.e. in a week.
No one knows how the two sides will proceed as the 9th review could not be finalized despite fulfilling all the important conditions.
