- Premier Shehbaz hopes it to be Pakistan’s last IMF borrowing.
- Asserts country to enter new era after agreement gets go-head.
- FinMin says structural reforms, self-sufficiency key to avert debt.
Prime Minister Shehbaz Sharif has said that his government is working to implement the International Monetary Fund’s (IMF) conditions to complete the $7 billion loan programme, which he hopes will be the country’s last.
Pakistan and the IMF reached an agreement on the 37-month loan programme in July. The IMF has said the programme was subject to approval from its executive board and obtaining “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners”.
“Once the IMF board approves the programme, we will enter a new phase,” the premier said, according to Reuters on Tuesday, adding, “Working on implementing all conditions for IMF programme.”
In August Moody’s said Pakistan’s default risk has reduced to a level consistent with a Caa2 rating, as per Moody’s. “There is now greater certainty on Pakistan’s sources of external financing, following the sovereign’s staff-level agreement with the IMF on 12 July 2024 for a 37-month Extended Fund Facility (EFF) of $7 billion.”
However, Pakistan’s loan approval is not on the agenda of the IMF Executive Board’s latest meeting schedule, which is a cause of concern as this loan deal is critical for the country to shore up its sinking economy.
On the other hand, the government is optimistic that the country will secure approval for a $7 billion bailout package from the IMF next month.
Meanwhile, in a televised message today, Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, stated that Pakistan had already signed a Staff Level Agreement (SLA) with the IMF and was in the advanced stages of securing the agreement’s approval by the IMF executive board.
While sharing the Prime Minister’s hopes that this will be the last IMF programme, Aurangzeb warned that it would depend on structural reforms and the country becoming self-sufficient.
The finance czar reaffirmed the government’s resolve to carry forward the reforms agenda, aiming at broadening the tax base and rightsizing the federal government to achieve macroeconomic stability what he called “basic hygiene” for sustainable growth.
He vowed to persevere with plans for new taxes on the retail sector despite strike threats, as a step towards winning approval from the board of the International Monetary Fund (IMF) for the loan.
The taxes, in line with ambitious revenue targets adopted to clinch a staff-level deal on the 37-month IMF programme, faced public backlash after they were introduced in the June budget.
“One thing I want to be very clear (about) … This is not going to be taken back,” Finance Minister Muhammad Aurangzeb said in a televised speech that urged wholesalers, distributors and retailers to contribute to the economy.
The comments follow a nationwide strike by retailers last week to demand the withdrawal of the new tax scheme and high electricity rates, the latest of the last few months protests against the new tariffs, taxes and inflation.
Although Muhammad Sharjeel Goplani, chairman of a group of traders, the All-City Tajir Ittehad Assocation, had threatened an indefinite strike if the demand was not met, no further action has been announced since.
The Fund’s board approval hinges on confirmation of financing assurances for Pakistan from development and bilateral partners.
Local media reported the approval was delayed by a lack of additional financing and unpaid energy sector subsidies announced by the eastern province of Punjab and the federal government.
In a statement, Punjab’s information minister, Azma Bukhari, said the federal government and the IMF had not contacted the province about an electricity subsidy and the Fund had not released any written statement.
The IMF, the finance ministry and the power ministry did not immediately respond to a request for comment.
Reining in unresolved debt across Pakistan’s power sector is a top concern of the IMF, which ended a $3-billion bailout in April that led to higher tariffs, hurting the poor and middle class, and cut household use for the first time in 16 years.
