The International Monetary Fund (IMF) on Tuesday demanded Pakistan to withdraw untargeted subsidies, reduce circular debt, meet petroleum levy and Federal Board of Revenue (FBR) tax collection targets, it is learnt.The IMF programme was going to end in June 2023. So far, around $3.5 billion of the $6.5 billion total package remained undisbursed.
Nathan Porter, the visiting mission chief of the IMF, raised the question about the implication of the opposition’s role in difficult decisions that Pakistan would have to take to avoid the default.
Pakistan with inflation at a high of 25 per cent is pushed to the brink by last year’s devastating floods, Pakistan has reserves of just $3.7 billion remaining, or barely enough for three weeks of essential imports, while hotly contested elections are due by November.
Pakistan is squeezed between IMF demands and Chinese interests.Pakistan need $3bn to meet its external debt obligations, $5bn to meet its current account deficit.In total, somewhere between $9bn and $10bn is required to stabilise the rupee.
Pakistan’s former finance minister Miftah Ismail said that If the IMF doesn’t come in, we’re looking at a default I can’t imagine Pakistan not going on a back-to-back IMF programme.Pakistan owes $30 billion dollars to China and might be better off just going to those countries that we owe a lot, or to the institutions we owe a lot, and trying and get some more long-term loans.
Pakistan’s debt-to-GDP ratio in a danger zone of 70%, and between 40% and 50% of government revenues earmarked for interest payments this year, only default-stricken Sri Lanka, Ghana, and Nigeria are worse off.
Esther Perez Ruiz, the IMF resident representative, Minister of State for Finance and Revenue Dr Aisha Ghous Pasha, SAPM on Finance Tariq Bajwa, State Bank of Pakistan Governor Jamil Ahmed and secretary finance also attended the opening round of talks.
What IMF is asking from Pakistan
* Withdrawing export-oriented sector subsidies of Rs110 billion
*FBR must meet tax collection target of Rs7,470 billion
*Imposing petroleum levy of Rs855 billion
*Three quarterly tariff increases equal to Rs5.54 per unit from now till June
*One additional debt surcharge of Rs2.93
*Pending fuel cost adjustment
*Privatisation of loss making State Own Enterprises
*Reducing government spendings and Increasing government Income