IMF agrees to extend programme for one year and add another $2 billion

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Breakthrough in Pak-IMF talks

Washington: Under the new administration in Pakistan, talks with the International Monetary Fund (IMF) underwent a major development, as it agreed to add $2B to the ongoing programme of $6B and increase the duration of the programme by one year to support Pakistan’s stressed balance of payments and thin foreign reserves.

Talking at a press conference in Washington, Minister for Finance Miftah Ismail said that the IMF would send a staff-level delegation to Pakistan in the middle of May for the continuation of its Extended Fund Facility (EFF) programme. He also said that the Fund had agreed to extend the programme by a year.

The previous PTI-led government and the IMF had signed a 39-month Extended Fund Facility (July 2019 to September 2022) with a total value of $6 billion. But, as the previous government failed to fulfil its commitments, the programme remained stalled for most of the time as $3 billion remained undisbursed.

However, the finance minister could not say if the next tranche of about $1bn would reach Pakistan before the next budget.

“We hope that the staff-level agreement on the enhanced programme will be concluded soon,” Miftah Ismail said.

Withdrawal of subsidies in phases

Regarding the subsidies announced on fuel prices and other notable things, the government and the IMF agreed to abolish the slashes in phases, meaning that petrol and electricity prices will increase further.

A senior official said that the IMF agreed to provide a space to the new government to “ensure removal of recently imposed subsidies as soon as possible.”

At per the present valuation, the government is facing a loss of Rs 21 per litre on petrol, Rs 51.52 per litre on diesel, and Rs 5 per unit on electricity.

Minister of State for Finance Ayesha Ghaus Pasha also accompanied Miftah Ismail at the conference. She explained that the government had no option but to withdraw the subsidies, but it would do so in a way that did not burden the ordinary people.

Hinting at the possible plan of action to carry out the withdrawal, the finance minister said that the government could fix a quota for motorcyclists, who would be provided petrol at subsidised rates, but there would be no subsidy for big cars.

SBP autonomy

Regarding the autonomy provided to the State Bank of Pakistan, Finance Minister Miftah Ismail indicated that no plan for the withdrawal was decided.

“We will not do anything that irks the IMF,” Miftah said.

When asked how the government would keep the economy under the present situation, Miftah Ismail said, “We will do so by improving the debt-to-GDP ratio, by enhancing the GDP.”

He also said that despite the current government’s differences with Imran Khan, “we will take full responsibility for all his commitments, all sovereign guarantees he made, whether those are CPEC loans or IMF loans.”

Both Miftah Ismail and Ayesha Ghaus Pasha said that they expected the reserves to improve by next week.

Read: IMF, Pakistan agree to continue current program

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