ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have finalised, documented and signed a bailout package on exchange rate, public finance, fiscal deficit and energy prices and an IMF mission will be visiting Islamabad in the third week of the current month to work out technical tables, said Finance Minister Asad Umar.
“We have reached an agreement and all the major issues have been settled and documented,” Mr Umar told a meeting of the National Assembly’s Standing Committee on Finance and Revenue on Monday after a weeklong visit to the US.
He also reported that Pakistan had dispatched a compliance report to the Financial Action Task Force (FATF) that would be reviewed by the Paris-based agency before sending its delegation to Islamabad by the third week of May for on-ground inspection.
He said the IMF staff mission would visit Islamabad this month to conclude various technical tables that would then be shared with the NA committee.
Finance minister says size of programme will be between $6bn and $8bn, rejects reports about his removal
During the meeting, leading representatives from various chambers of commerce and industry and the provincial governments opposed the short period being offered for tax amnesty scheme and proposed that these should be well structured and provide sufficient time to the people. The provinces, particularly Punjab, Sindh and Khyber Pakhtunkhwa, said the real estate valuations had blocked their property business, resulting in huge revenue loss even though the Federal Board of Revenue might have improved its revenues.
The finance minister later told journalists that the bailout package with the IMF had been “agreed upon in writing and we have an agreement on all policy matters”. These matters included exchange rate, fiscal deficit, energy, public finance and public sector entities, he added.
He said the exact size of the fund programme had not be concluded, adding that it would be between $6 billion and $8 billion. He said major flows would then come from the World Bank and the Asian Development Bank that had been blocked in the pipeline owing to insufficient import cover and the absence of IMF umbrella.
He said Pakistan’s financing gap was around $15bn while $7-8bn from the World Bank, $6-8bn from IMF and ADB would be available while the process for launch of international bonds had already been started. He said he had engagements with leading fund managers and investors in New York and he was happy to report that Pakistan’s bond price had dropped from 9 to 7pc and overall environment was very encouraging for Pakistan’s paper.
He said it would be premature to talk about bond size but the process for its launch had been triggered and may be materialised by the end of current fiscal year or at the start of the next fiscal year.
Asked about reported IMF demands for complete details of Chinese loans, the finance minister said such reports were unfounded and surprising because the fund had asked questions on the subject in October last year and all the details of the Chinese assistance were provided as the government felt there was nothing to hide.
Responding to another question, he said the IMF conditions would not burden the people, rather the difficult decisions required to correct the economy marred by problematic policies, for example Rs600bn deficit in power and gas sector alone, of the past would have some costs. He said the tax amnesty scheme would be presented to the cabinet for approval and go into effect over the next two-three days.
Asked about the adjustments in energy prices under the IMF programme, he said the government had not taken any decision about energy prices. The previous government, he added, had inducted expensive power capacity that the National Electric Power Regulatory Authority would keep notifying from time to time. He also refuted a question that IMF had made a demand for cut in defence budget.
He told the NA committee that the economic crisis had been overcome over the last eight months with the successful strategy of the government. He said funds provided by friendly countries had helped create a cushion over the period to compress current account deficit. As a result, the conditions are much different now than the government was discussing with the IMF in October-November last year.
He said the crisis was over now, but stabilisation would continue for sometime which could not be expedited or else the country would again be in the balance of payment problem.
Mr Umar rubbished reports about his removal from the federal cabinet.
When asked about media reports in this regard, he quoted a verse of legendary poet Mirza Ghalib, hazaron khvahishen aisi ki har khvahish pe dam nikle (Thousands of desires, each worth dying for...)
Information Minister Fawad Chaudhry also strongly refuted media reports about cabinet reshuffle, saying no portfolio of any minister was being changed and “all such news regarding any such change are concocted”. He said the country was passing through a critical juncture and these unfounded reports were against the national interest. He said Prime Minister Imran Khan had the prerogative to change portfolios, but he was satisfied with the performance of cabinet colleagues. He said the finance minister had very constructive talks with the IMF, adding that on the Financial Action Task Force things were moving in the right direction.
The finance minister did not agree to a question that the IMF programme and FATF compliance were interlinked, but said he had reminded FATF President Marshall Billingslea during his US visit that India co-chairing a review group was not neutral and had been publicly speaking against Pakistan’s interest. He said the FATF chief promised that politics will not be allowed to play a role in its reviews and Pakistan need not to worry about that.
“No response”, said the finance minister when asked if he considered FATF President Billingslea a neutral umpire, adding his position required him to be neutral and fair. Mr Billingslea is also serving as the US Department of the Treasury’s Assistant Secretary heading the Office of Terrorism Financing and Financial Crimes. In this role, he is responsible for policy development and international engagement pertaining to anti-money laundering and counter financing terrorism (AML/CFT).
Meanwhile, the IMF in a statement said it had constructive discussions with Pakistani authorities during the IMF/World Bank Spring Meetings in Washington DC towards an IMF-supported programme. “At the request of the authorities, an IMF mission will be going to Pakistan before the end of April to continue the discussions”, it said.
Published in Dawn, April 16th, 2019