IMF to disburse $2.77 bn corona fund by 23rd: Tarin

ISLAMABAD: Despite ‘questions’ raised by the IMF over the much-hyped Kamyab Pakistan Program (KPP) for disbursement of Rs1.6 trillion loans, Minister for Finance Shaukat Tarin said on Thursday that the government would not “step back” from launching this programme meant for helping the poor. He also announced good news that the IMF would disburse $2.77 billion unconditional loan at zero mark-up by August 23, 2021 to help the country mitigate the COVID-19 pandemic out of the total $650 billion package for all affected countries.

This money would help boost the country’s foreign exchange reserves. The rupee equivalent to $2.77 billion will be utilized efficiently and in a productive manner. He assured that the additional money would be utilized without creating distortions on the economic front.

“Prime Minister Imran Khan and I myself have decided that we will not step back from launching the KPP as some questions were raised by the IMF but we will satisfy them,” Federal Minister for Finance Shaukat Tarin said while addressing a news conference here at the Q Block (Finance Ministry) on Thursday evening. He was of the view that Imran Khan would not listen to anyone on this scheme.

Flanked by Special Assistant to PM on Finance and Revenues Dr Waqar Masood on this occasion, Finance Minister Shaukat Tarin replied that the PM made a commitment to get him elected as a senator and he was confident that it would be fulfilled.

Shaukat Tarin said that the World Bank was expected to provide a $1 billion loan and some prior actions were under implementation and this amount would be approved by September 2021.

To another question regarding reservations expressed by the IMF over sustainability of KPP, the minister replied that the IMF raised some common sense questions but he was determined that the KPP was meant for poor segments of the society that was designed after spending hundreds of hours. The rural support programs such as Akhuwat, NRSP, KASHF and others were doing work in micro credit and personalities like Shoaib Sultan would be involved in this program, who is Dr Younas (pioneer of micro credit in Bangladesh) in our country.

“We will place a check and balance and if any credit provider faced a default of 10 percent, it would be closed down,” the minister said and added that rupees one billion would not be doled out on daily basis without scrutinizing the capacity of borrowers. He reminded that he had rectified the Yellow Cab Scheme that was launched during the decade of 1990s and said that there were unviable loan schemes and he had refused to undertake such schemes at that point of time.

The minister said that there was no Plan B and C at the moment as Pakistan wanted to remain in the IMF program. There was a recess in the IMF program when both sides found divergence in their prescriptions as Islamabad did not want hiking of power tariff and doubling Personal Income Tax. Now the July 2021 performance of FBR showed that the revenue collection had surpassed its target and increased by 24 percent. On the power sector, different reforms are underway and positive outcome would appear after a few months. The government has struck deferment agreement of Rs850 billion with the IPPs.

The minister conceded that the government would not be able to get Rs610 billion as Petroleum Development Levy (PDL) envisaged in the budget and added in the same breath that some revenue options were not declared, so it would be bridged. He said that the collection of PDL could hike inflation, so it could not be done.

When asked about the geo-political situation whereby the international community was not extending support to Pakistan, Tarin conceded that the geo-political situation was not favorable but they were not vying for winning any medal, so efforts were underway to continue the IMF program because the tax-to-GDP ratio should be jacked up to 18 to 20 percent while the power sector was unsustainable and needed to be fixed.

To another query that the government was not making any progress on the power sector reforms, the minister replied that he should be given some time as positive outcome would come on the surface after a few months. He said that inflationary pressures were receding but reminded that the import of food was fueling inflation. He said that the government had adopted a strategy to flood the market with ghee and sugar because there is cartelization and they obtained stay orders from courts when the Competition Commission of Pakistan (CCP) takes action against them. He said that the CCP proved as a “toothless” institution, so the government would take measures to rectify the situation. He said that the ghee manufacturers were exploiting the situation but now the government had decided to import it in bulk to sell at Rs250 per kg. The same will be done in case of sugar as the government had decided importing 0.6 million tons of sugar to ensure that cartels did not exploit the situation by increasing the prices in domestic market.

When asked about the rising current account deficit (CAD), he said that when the economy started picking up, the CAD would be increased but it should remain controllable. He said that CAD would be hovering around 1.5 to 2.5 percent of GDP and it is a manageable limit. He said that the CAD had gone out of control a few years back because the exchange rate was kept artificially stable. He cited the example of Thailand and stated that their currency was kept artificially high, so it converted into a crisis. He said that the disequilibrium surfaced when distortion was done on the economic front. He said that the exchange rate must not be fixed because it gets adjusted as “shock absorber”. To another question with regard to the Saudi Oil Facility (SOF) on deferred payment, the minister replied that he had talked on this subject and it would be obtained soon.