The government on Thursday requested the IMF to send its mission to Pakistan next week to conclude a long-awaited agreement to revive the loan programme, as the policymakers feel there is no other option left.
In this connection, Finance Secretary Hamed Yaqoob Shaikh formally wrote to the IMF to visit Pakistan, after Prime Minister Shehbaz Sharif virtually chaired a meeting of the economic team which was part of a weeklong deliberations.
Under the revised macroeconomic and fiscal framework, the government wants to convince the IMF to downward revision on the Petroleum Development Levy (PDL) target from Rs855 billion to Rs550 billion for the current fiscal year. The FBR’s tax collection target of Rs7,470 billion would remain intact.
The development comes as gas prices in Bangladesh were increased by up to 179 percent in four consumer categories with effect from February 1 on Wednesday, with the Hasina Wajid government focusing on a $4.5 billion deal with the IMF.
Earlier, the world’s leading lender urged Dhaka to cut a range of subsidies and redirect the money to more targeted assistance for the poor.
Media persons were informed by sources that the government had completed working on all four areas on the basis of interactions on the sidelines of the Geneva conference and was ready to move ahead with reforms committed under the programme.
One of the participants described the IMF bailout package was a panacea for all challenges Pakistan faced. The reason for not taking the required actions to convince the lender to field the mission was that all decisions involved significant challenges and unless balanced with countermeasures could further aggravate the situation in an already bruised economy.
With an increase in the central bank’s policy rate to check inflation, the debt servicing cost could go up. Besides, increasing electricity and gas rates would stoke up inflation, he said.
About Rs70-80 billion revenue is being targeted to be charged to banks who had enjoyed lofty profits out of foreign exchange operations but the remaining Rs150bn or so has to be met through other sources like flood levy on imports.
Therefore, the government might take some actions that the IMF find insufficient to meet the target and require additional steps that might not be viable within a short period of time, one of the sources said.
Meanwhile, it is expected that the IMF will show some flexibility given the recent engagements and economic challenges posed by the post-floods situation.
The IMF had four major demands — market-based exchange rate, increase in electricity and gas rates, and additional taxes to make up for the revenue slippages so as to contain the fiscal deficit within the original programme targets with adjustments for flood expenditure.
But the government members say the thrust of all these measures would not be allowed to flow down to the common people and the maximum burden would be limited to well-to-do sections of society.
State Minister for Finance Dr Aisha Ghaus Pasha, who was part of the consultations, said Pakistan had conveyed to the IMF that it was ready to implement reforms as agreed and wanted to settle the outstanding issues. The government wanted to continue the IMF programme in a manner that the common people did not bear the burden of tough decisions, she added.