Friday September 22, 2023

Pakistan making last-ditch effort to secure IMF deal

IMF’s resident representative for Pakistan says the programme will restart once authorities follow the lender’s goals

By Our Correspondent
June 07, 2023
The seal for the International Monetary Fund is seen in Washington, DC, January 10, 2022. — AFP
The seal for the International Monetary Fund is seen in Washington, DC, January 10, 2022. — AFP

ISLAMABAD: Pakistan and the IMF are still making their last-ditch efforts for narrowing down their differences over the external financing needs and budgetary numbers for the next financial year. The IMF wants confirmation on external financing gap of $6 billion for the current fiscal year ending on June 30, 2023 and unveiling of budgetary framework completely aligned with its prescriptions. The next few days are very important for achieving a breakthrough but there are two major pre-requisites, including filling the external financing gap and evolving a broader agreement on budgetary framework. If it does not happen in the next few days, the IMF programme will end in failure on June 30, 2023. “Pakistan requires serious efforts on revenue mobilisation front and rationalization of expenditure side,” top official sources said. “The IMF has asked the Pakistani side to ensure raising of revenue surplus by the provinces in order to reduce the overall budget deficit, so it should be done by signing an MoU among the Centre and the provinces,” the sources quoted the IMF official as saying. The taxation measures on provinces front also came under discussion but the Finance Ministry high-ups argued that under the arrangements of the federating units, the Centre cannot dictate the provinces on well-defined Constitutional provisions. “We can at least project that the provincial revenues will go up at estimated growth rate of 20 percent,” said the official.

The IMF has been still sticking to its demands for securing assurances on $6 billion external financing as Pakistan had already communicated to Washington based lender of the last resort that Islamabad managed $4 billion and efforts were underway to get it from all possible avenues. On budgetary framework, the IMF wants more revenue mobilization efforts as the government so far envisaged FBR’s tax collection target of Rs9.2 trillion. The IMF had pitched its initial estimates of FBR’s revenue collection in the range of Rs9.8 trillion but it is hoped that a consensus might be struck over the range of tax revenues of Rs9.4 or Rs9.5 trillion.

The non-tax revenue target might be hovering around Rs2.2 to Rs2.4 trillion for the next budget. The IMF expects that there will be serious efforts required on the expenditure rationalization efforts, especially on the fronts of untargeted subsidies, doling out of development programs and pension reforms in the next financial year. “If the expansionary budget is going to be unveiled, the hopes of striking SLA will end, so there is an opportunity for Islamabad to strive for a balanced approach.” Meanwhile, the Ministry of Finance in an emailed response to Bloomberg, said the government has lined up $4 billion in external financing and hopes to strike a deal with the Washington-based lender before unveiling the budget this Friday. “Pakistan remains committed to completing the IMF programme and has already demonstrated its seriousness,”

the ministry said. The ministry further added that it remains committed to mobilising additional liquidity despite a significant contraction of the current-account deficit, which has reduced the requirement. In an email to Bloomberg, IMF’s Resident Representative for Pakistan Esther Perez Ruiz said the programme would restart once the authorities follow the lender’s programme goals, present adequate financing while presenting the budget, and there is “proper market functioning” of the Pakistani rupee. “IMF staff continues the engagement with the Pakistani authorities to pave the way for a Board meeting before the current programme expires,” said the official.