Sunday November 27, 2022

Friendly countries to bridge $4bn financing gap: Miftah Ismail

Miftah said that friendly countries would bridge the financing gap of $4 billion assessed by the IMF out of the total external financing requirement of $35 billion

July 17, 2022
Finance Minister addressing a press conference in Islamabad on July 16, 2022. Photo; PID
Finance Minister addressing a press conference in Islamabad on July 16, 2022. Photo; PID

ISLAMABAD: Minister for Finance Miftah Ismail Saturday said that friendly countries would bridge the financing gap of $4 billion assessed by the IMF out of the total external financing requirement of $35 billion.

In a news conference on Saturday, the finance minister maintained, “I will show you the filling of this $4 billion gap assessed by the IMF for the ongoing financial year within July. We are expecting a friendly country to provide a $1.2 billion oil facility on deferred payment.

Another country will invest $1.5 to $2 billion in stocks on a government-to-government (G2G) basis. Another friendly country will provide us deposits in the shape of cash and Special Drawing Rights (SDRs). Another friendly country will provide us gas on deferred payment.” He shared with the media expected dollar inflows from friendly countries without naming them. He also did not share specific information about the expected dollar inflows from friendly countries but official sources confirmed that Pakistan was eyeing an additional $1.2 billion oil facility from Saudi Arabia on deferred payment. Pakistan is also expecting $1 to $2 billion from it in the shape of SDRs or cash and Chief of Army Staff Gen Qamar Javed Bajwa is playing a key role in it. Pakistan is negotiating RLNG from Qatar on deferred payment. Islamabad is also holding parleys with the UAE to fetch $1.5 to $2 billion in investment in the stocks through the G2G agreement.

Flanked by Minister for Information and Broadcasting Marriyum Aurangzeb, the minister said that he would make a commitment to bring down inflation pressure as it would not remain at 21.3pc in the coming months and there would be zero loadshedding in the next summer in Pakistan. “The government has filed a review petition before the National Electric Power Regulatory Authority (NEPRA) as Prime Minister Shehbaz Sharif wanted to protect users of 100 units from the hike of Rs7.91 per unit in the base tariff,” he explained. About the gas tariff, he said that it was not a part of IMF conditions and over a 300pc hike in tariff had been proposed for consumers who are affluent. “The ECC referred back the summary to the Ministry of Petroleum with the direction to make some changes but its notification has not yet been issued,” he maintained.

The minister was optimistic that the energy import bill would be slashed down from $3.7 billion per month in June 2022 to $2.7 billion in July 2022, so there would be a saving of $1 billion. “This saving on a monthly basis in accordance with conservative estimates will save $6.5 billion that would help appreciate the rupee against the dollar,” he said and added that the rupee had appreciated against Euro by 5pc, pounds 1.5pc and yen by 1 to 1.5pc but depreciated against the US dollar because of its strength against all other currencies. The IMF agreement, he said, would help stabilise the exchange rate but added in the same breath that he did not want to speculate about the currency.

When asked about the expected multi-billion dollar loans from multilateral creditors in the pipeline after signing the staff level agreement with the IMF, he said the ADB would provide $3.5 billion and the World Bank $2.5 billion as well as $500 million will be provided by the Asian Infrastructure Investment Bank (AIIB) during the current fiscal year. The Islamic Development Bank, he said, would also provide financing.

He said that Pakistan had avoided default and did not follow the path of Sri Lanka. He said that the prices of POL had touched Rs450 per litre in Sri Lanka and people had to stand in a queue for five days to get one litre petrol and diesel. “There is no power to run hospitals in Sri Lanka,” he added.

He said the government would provide interest-free loans up to Rs0.5 million and up to Rs1.5 million and the borrower would have to manage collateral as guarantees. “Up to Rs5 million, there will be a reduced mark-up in the range of 7-9 percent,” he maintained.

He said that airfares and Pakistan Railways fares had come down after the reduction POL prices. “The government has passed on full benefits to consumers and will do the same if the prices further reduce in the international market,” he added.

He criticised the performance of the PTI and termed Imran Khan a “liar” and stated that his incompetence had pushed the country to the brink of bankruptcy where the budget deficit remained in the range of Rs3,500 billion in the last four years on an average. “It escalated up to Rs5,100 billion in the last fiscal year only because of irresponsible and wrong policies of the PTI-led regime. The public debt went up by Rs20,000 billion in four years. The trade deficit rose to a historic high whereby imports touched the $80 billion mark. The imports stood at $30 billion but now the government would touch the $35 billion mark,” he elaborated. He said that the PTI government had not added a single megawatt to the national grid, abandoned long-term contracts in RLNG and other petroleum products and caused heavy losses to the economy.

“The FBR’s collection target of Rs7,470 billion will exceed in the current fiscal year. Subsidies will be decreased. Power sector losses had accumulated to Rs1,350 billion in the last fiscal year as the Ministry of Finance provided Rs1,072 billion to the Ministry of Power and Rs280 billion was added to the monster of circular debt. Now the IMF assessed the flow of circular debt at Rs850 billion out of which over Rs600 billion was cleared by the government through payments to the IPPs,” he added.

He said that there was a total billing of Rs1,600 to Rs1,700 billion but the PTI-led government had caused losses to the power sector in every aspect. The transmission and distribution losses could not be reduced while collection of billing dropped from 99 to 80 percent. “When the PDM government took over, there was a shortfall of 7,500 MW. There is circular debt of Rs1,300 billion on the gas sector. All these losses pushed the country to the brink of default and the government took bold measures to avert the looming default,” he explained.

To a query, he said that the privatisation law would be changed as SME Bank had been on the active privatisation list since 2007 but it could not be privatised. “The Roosevelt Hotel has been on the privatisation list since the 90s but it could not be sold out. Now the provision of G2G would be incorporated into the proposed privatisation law,” he added.

The minister said the government had imported 0.5 million tonne wheat so far and more wheat would be imported.