ISLAMABAD: Finance Minister Miftah Ismail Wednesday announced that a Chinese consortium of banks had signed a $2.3 billion loan facility agreement that was expected to be received by Islamabad within a couple of days.
In a tweet, he said, “The Chinese consortium of banks today signed the RMB 15 billion ($2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday. Inflow is expected within a couple of days. We thank the Chinese government for facilitating this transaction”.
Soon after a broader agreement on budget 2022-23 between Pakistan and the IMF [International Monetary Fund], the Chinese loan facility was made available for Pakistan. The increased tension between the USA and China had created problems for Pakistan’s economic managers, but it was a good omen for the country’s dwindling foreign currency reserves that both the IMF and China had moved forward simultaneously for helping the struggling economy of Pakistan.
Pakistan and the IMF struck broader agreement on fiscal framework for the fiscal year 2022-23 whereby Islamabad presented a feasible plan to bring down the budget deficit to 4.9 per cent of gross domestic product (GDP) and converting primary deficit into primary surplus to the tune of Rs152 billion for the coming fiscal year 2022-23, starting from July 1, 2022.
IMF’s resident chief in Pakistan, Esther Perez Ruiz, said on Wednesday that discussions between the IMF staff and the authorities on policies to strengthen macroeconomic stability in the coming year continue, and important progress had been made over the FY23 budget.
The statement also indicated that Pakistan and the IMF made progress, but there were certain areas left on which both sides would have to evolve a consensus before striking staff-level agreement. These areas included monetary targets including calculating the current account deficit (CAD), finalising indicative targets of net international reserves (NIR) and requirement of further tightening of monetary policies. With existing levels of Sensitive Price Index (SPI), it is expected that the Consumer Price Index will go up to 15.5 or 16 per cent for June 2022, so the policy rate was also expected to go up further in coming monetary policy.
The government will have to increase electricity and gas prices. There will be some new structural reforms placed for the completion of 7th Review and release of $1 billion tranche under $6 billion Extended Fund Facility (EFF) programme.
On the fiscal side, both sides evolved a consensus over jacking up the FBR target, placing tax slabs on poverty alleviation tax, making adjustments in salaried slabs and taking other additional measures to jack up the FBR target up to Rs7,442 billion for the next fiscal year. The target of petroleum levy will be revised downward from Rs750 billion to Rs550 billion.
On expenditure side, the pension bill increased up to Rs609 billion and civilian government expenditures Rs600 billion for the next fiscal year.
Now the POL prices in international market had started witnessing declining trends and in the last few days registered a decline by almost 6 per cent; so it is hoped that the government would be able to find out cushion for collecting petroleum levy without further increasing prices in the domestic market. But it is yet to be seen how much the POL prices would remain on lower side because fluctuation in prices continued in the aftermath of Russia-Ukraine war and most of the time it went up in the last few months.
Reuters adds: Key progress has been made in talks on the revival of Pakistan's International Monetary Fund (IMF) bailout programme, both sides said on Wednesday, with Islamabad expecting the lender to increase the size and duration of the 39-month, $6 billion facility.
The two sides held talks on Tuesday night and agreed on the budget and fiscal measures but still need to agree on a set of monetary targets, Finance Minister Miftah Ismail said. He did not expect any "hiccups" in the remaining talks and expected an initial memorandum on macroeconomic and financial targets and then an official agreement.
"I am also expecting that the duration of the program will be extended by a year and the amount of loan will be augmented," he told Reuters, adding that the IMF had not committed to it yet, but based on talks he expected it to come through.
APP adds: Finance and Revenue Minister Miftah Ismail said that Pakistan Muslim League Nawaz (PMLN) and its allied parties tried hard to provide maximum relief to masses in the budget.
Talking to a private news channel, he said if the government was imposing taxes on lower income class, the only reason was the agreement with the IMF on difficult terms with Pakistan Tehreek-e-Insaf and the government was also broadening and deepening the tax net in this regard to meet targets.
He said the situation in which the country was showed the ruling elite did not bother to pay taxes, which was a liability of the class, and the government would impose one-time tax on rich and heavy (rich) companies.
The minister said the government was also enhancing tax target up to Rs438 billion and suggestion to receive tax on GIDC up to Rs200 billion by the IMF was rejected by the government, he added.
News Desk adds: Speaking in Shahzeb Khanzada programme on Geo News, Miftah Ismail said under the new tax regime, the tax of his own company would increase to Rs200-300 million. Shehbaz Sharif and his sons' companies would also pay more taxes, he added.
Miftah said the government had asked those earning Rs300 million annually to pay 4 per cent tax. He said it would not burden them much if they pay Rs12 million tax annually for Rs300 million income, for the sake of country.
Miftah denied reports that petroleum levy target had been lowered from Rs750 billion to Rs550 billion. Giving details of sources of government funds generation, he said two safe deposits of $500 million each of China were due to be paid on June 23, 25, 27. However, the friendly country had agreed to reroll those deposits. The $2 billion loans, which were due to be paid in June, July had also been rerolled. That mean all such amounts which were due to be paid in June, July out of total $21 billion, had been rerolled.
In the same manner, Pakistan expects that the loans given by Saudi Arabia and the UAE would also be rerolled, hoped the minister. As soon as the IMF staff-level agreement was reached, Pakistan had $9 billion approved credit lines in hand. Out of those approved loans, $8 billion would come from the Asian Development Bank. Another agreement of $1.5 billion had also been signed, claimed the minister.
Miftah said Pakistan had so many loan and funding facilities that there would be no problem as soon as the IMF programme was restored fully. Despite such costly oil in the world market, the country would be able to build its oil reserves.
Miftah said resources would also be generated through privatisation of some assets. $17 billion approved programmes of World Bank and ADB are already there, and talks would also be held with Asian Infrastructural Bank. He said things would be managed with ease in future.