Finance Minister Ishaq Dar announced that the Pakistani government has received the Memorandum of Economic and Financial Policies (MEFP) from the International Monetary Fund (IMF) regarding the completion of the ninth review of a $7 billion loan program. Despite this progress, Dar stated that a staff-level agreement with the IMF is still underway. The MEFP outlines the conditions and policy measures for both parties to reach a staff-level agreement, which will then be submitted to the IMF’s Executive Board for approval. The minister made these remarks after the IMF delegation concluded their virtual talks with the Pakistani government and Pakistan Reaches Agreement with IMF on Loan Conditions.
Pakistan and IMF Continue Negotiations for Loan Completion, Reforms in National Interest
Finance Minister Ishaq Dar confirmed the receipt of the draft Memorandum of Economic and Financial Policies (MEFP) from the International Monetary Fund (IMF) after the recent virtual talks between the two parties. Despite the absence of a concluding statement from the IMF delegation, Dar emphasized that there was no confusion and that both sides would hold another virtual meeting to review the MEFP. The finance minister acknowledged that reforms outlined by the IMF were necessary for Pakistan’s economic growth, despite being painful. He criticized the previous government for their poor governance and economic decisions and vowed to continue working towards the successful completion of the IMF loan program.”
IMF Approval Process for Pakistan Loan on Track, $1.2bn SDR Disbursement Expected
Finance Minister Ishaq Dar provided an update on the progress of the International Monetary Fund (IMF) loan program for Pakistan. Once the Memorandum of Economic and Financial Policies (MEFP) is finalized, the IMF will follow its internal process and hold a Board meeting for approval. Dar stated that the process is standard and cannot be shortened or extended unnecessarily. Upon completion of the review, the country is expected to receive a $1.2 billion disbursement in the form of Special Drawing Rights (SDRs), which are international reserve assets allocated by the IMF to supplement a member state’s official reserves.”
Pakistan’s Agreements with IMF Include Increased Taxes and Reduced Subsidies
Pakistan has reached agreements with the International Monetary Fund (IMF) regarding economic reforms. These agreements include the implementation of taxes amounting to 170 billion rupees, minimizing untargeted subsidies in the gas and energy sectors, preventing the addition of debt in the gas sector, raising the petroleum development levy on diesel by two increments of 5 rupees on March 1st and April 1st, and increasing the allocation of the Benazir Income Support Program (BISP) to 400 billion rupees.
Pakistan Implements Taxation and Energy Reforms as Part of IMF Agreement
Pakistan’s Finance Minister Ishaq Dar has announced the policy measures agreed upon with the International Monetary Fund (IMF). These measures include the imposition of taxes amounting to 170 billion rupees, which the government plans to implement through a finance bill or ordinance. The focus will also be on reducing untargeted subsidies in the energy sector and reducing the flow of debt in the gas sector. The government has also fulfilled its commitment to increase the petroleum development levy (PDL) on petrol to 50 rupees per liter and plans to increase the PDL on diesel to the same amount in the near future.
The Finance Minister of Pakistan has confirmed that the government and the IMF have reached an agreement on policy measures aimed at addressing the country’s economic challenges. The measures include the imposition of taxes amounting to Rs 170 billion, minimization of untargeted subsidies in the gas and energy sectors, ensuring zero addition to the gas sector’s circular debt, and raising the petroleum development levy on diesel to Rs 50. The allocation of the Benazir Income Support Programs (BISP) has also been increased to Rs 400 billion.
The finance minister acknowledged that the energy reforms agreed upon with the IMF would be implemented through the federal cabinet, and the primary focus would be on reducing the flow of subsidies and ensuring that there is no addition to the circular debt in the gas sector. The government has also agreed to increase the allocation to BISP to help the most vulnerable people affected by inflation.
Regarding electricity prices, the minister stated that the IMF was working out a plan to address the country’s generation cost and the recovery of costs, but emphasized that the entire difference in amount would not be recovered by increasing the tariff. The finance team was reportedly “satisfied” with the negotiations related to the power tariff.
The finance minister emphasized that the government was committed to implementing the agreement reached with the IMF and following through with the necessary reforms. Despite the challenges and difficulties in the negotiations, the government was determined to restore the country’s economic stability and improve its financial situation.
In conclusion, Dar emphasized that the government was making efforts to ensure that the reforms did not directly burden the common man, and that it would take steps to protect the most vulnerable people affected by inflation, such as increasing the allocation for the Benazir Income Support Programmed. He also assured the public that the country’s foreign exchange reserves situation was under control and that the State Bank was managing it effectively.
IMF statement
The IMF mission chief also emphasized the need for structural reforms in key areas, such as improving the business environment, reducing the fiscal deficit, and increasing the efficiency of the public sector.
The statement also mentioned the importance of maintaining a strong commitment to implementing these policies, in order to restore economic stability, support economic growth, and improve the standard of living for all citizens.
Overall, the statement indicated that the IMF was satisfied with the progress made during the negotiations and was committed to working with the government of Pakistan to help achieve its economic goals.
The statement by the IMF Mission Chief highlights the importance of implementing these policies in a timely and decisive manner in order to secure macroeconomic stability and sustainable development in Pakistan. The virtual discussions in the coming days will finalize the implementation of these policies, and their success will be critical in helping Pakistan overcome its current economic challenges, including the decline in foreign exchange reserves. The IMF disbursement of $1.2bn, along with financial support from other official partners, is expected to provide much-needed relief to the country’s economy.
For your information’s also read these question and answers:
- Which country has taken highest loan from IMF?
- Argentina is the biggest debtor to the IMF, with a total outstanding debt of $42.2bn. The country has had a long and troubled relationship with the IMF, with a history of equally spectacular fall-outs and bail-outs. At the turn of the century, the IMF made $88.3bn available to bail out the country’s ailing economy.
- How much loan does Pakistan have?
- About Rs. 24.309 trillion is owed by the government to domestic creditors, and about Rs. 2.3 trillion is owed by Public Sector Enterprises (PSEs). Similarly, as of October 2021, external Debt of Pakistan is now around US$121.75 billion.
- Why IMF has failed?
- The IMF has not “failed” per se, but it has faced criticism for its policies in some countries and its approach to debt crisis management. Some argue that IMF conditions often lead to austerity measures that can be harsh on the population and may not effectively address underlying economic problems.
- Who recently led IMF to Pakistan?
- Nathan Porter, the IMF Mission Chief, recently led the IMF mission to Pakistan.
- Which country has largest loan?
- There is no definitive answer to this question as it can change over time, but Greece is among the countries with the largest amount of IMF loans.
- How will Pakistan pay its debt?
- Pakistan will pay its debt to the IMF through a combination of measures such as implementing structural reforms, increasing taxes and reducing subsidies, and accessing funding from other sources.
- How much Pakistan pay to IMF?
- Pakistan had signed a $6bn bailout package with the IMF in 2019, with another $1bn added to the programe a year later. The first payment of $1.1bn has been stalled since December. “The prime minister has said we are committed … We will implement whatever has been agreed upon between our teams,” Dar told reporters.
- How many times IMF bailed out Pakistan?
- This war caused huge loses to Pakistan. For which, Pakistan got loan of US$84,000,000 in 1972, US$75,000,000 in 1973 and another of US$75,000,000 in 1974 to meet its growing needs. In 1977, another standby arrangement of US$80,000,000 was made on urgent basis.
