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May 12, 2019

Finance Ministry’s top official missing from IMF talks

Top Story

May 12, 2019

ISLAMABAD: Some serious questions within the government were raised about the quality of bail-out package being negotiated between Pakistan and the International Monetary Fund (IMF) as a senior SBP official disclosed to The News that a top finance ministry official is missing from the last three days of these talks.

The State Bank official source, who was present in the Pak-IMF meetings, was surprised that why the key finance ministry official who was part of the negotiating team before was missing when the talks are in the final stage. The SBP source said the finance ministry official opted out of these talks when he was told not to argue with the IMF. The finance ministry official, the source said, was fighting hard with the IMF to get the bail-out package with such conditions which are favorable to Pakistan but he was stopped from arguing Islamabad’s case effectively. The source said the quality of Pak-IMF talks was really pathetic, as Islamabad almost agreed to everything that the IMF wished. According to the source, it was a “complete submission” and a total “sell-out” instead of a “bail-out” package. According to another source, Pakistan has agreed to some really tough conditions of the IMF and now the deal awaits the green light from the Fund’s headquarters in Washington. However, an official on condition of anonymity said that Pakistan was not in a position to have its say, adding that economic condition of the country does not allow Islamabad to bargain much. He said the team negotiating on behalf of Pakistan comprises patriotic Pakistanis who will prefer get the best deal in favour of Pakistan. He said the Pakistani negotiators are experts in their fields and they know how to do things in a better way.

According to media reports, Pakistan and the IMF are negotiating agreement on a fresh bailout package of $6.5 billion in the wake of tough conditions of the Fund on account of taxation, upfront hike in discount rate and withdrawal of subsidies in power sector. They were scheduled to conclude parleys on fresh bailout package till May 10 but both sides after hectic consultations convinced the IMF to extend its stay to next two days for making more efforts to striking a staff level agreement. Media reports say the IMF is asking Islamabad to move ahead with additional tax measures of Rs700 to Rs730 billion in upcoming budget through a combination of both withdrawal of different tax exemptions and raising tax rates. It has also been reported that Pakistan has accepted the IMF’s demands of flexible exchange rate regime, withdrawal of subsidies, containing borrowings from the central bank and reinitiating the privatisation programme. It is said the IMF has also reopened the issue of upfront increase in discount rate by at least 2% despite that the real interest rates were already positive by 3.75%. The other key area was the exchange rate, as the IMF model showed at least 20% further devaluation of rupee against the US dollar.

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