ISLAMABAD: Confirming that Pakistan will receive $2.77 billion ‘unconditional’ funds from the International Monetary Fund (IMF) on Aug 23, Finance Minister Shaukat Tarin on Thursday said the government would address the global lender’s concerns over its proposed Rs1.6 trillion worth of Kamyab Pakistan Programme (KPP) and take forward the $6bn Extended Fund Facility currently “in recess”.
Speaking at a hurriedly called news conference after a long post-budget gap because of his health issues, Mr Tarin said he had been promised by the prime minister to make him senator to continue as finance minister and he had no reason to doubt it would not materialise before the expiry of the remaining two-month constitutional window.
The minister said the IMF would transfer $2.77bn of the country’s share to the State Bank of Pakistan (SBP) account on Aug 23 out of $650bn general allocation the Washington-based lending agency made to all its members to boost international liquidity challenged by the global health pandemic.
“Pakistan’s share in the general allocation is 0.43 per cent and $2.77bn would be transferred to our account,” he said. “This support is unconditional, has no cost, will increase our reserves and will have salutary effect on Pakistani rupee.”
Minister says global lender’s concerns over Rs1.6tr Kamyab Pakistan Programme to be addressed
The finance minister said the government would now decide how to utilise the additional funds, but made it clear that he would not allow wastage and ensure their productive use so that fiscal sustainability achieved so far was not affected.
Mr Tarin said he would not comment on the earlier $1.2bn Covid-19 emergency support as the Auditor General of Pakistan had written 34,000 audit paras and a lot of people would be writing replies, but “what I can assure is that these additional funds would be utilised with proper consultation to avoid any distortion in the economy. Nobody will be allowed to go shopping in malls while I am around”.
Responding to questions about the IMF programme, the finance minister said he had a different approach to the programme when he assumed the charge and did not allow increase in power tariff and personal income tax as demanded because it was not progressive approach. Both demands would have impacted the economy while the country required economic growth, he added.
Mr Tarin said there was no economic growth over the past three years that created a surplus power syndrome, but even 7-8pc growth might not have absorbed the full capacity. “We have been able to defer Rs850bn payables to independent power producers (IPPs) to create fiscal space and address some cash flow problems,” he said.
Because of different approaches on revenue and power sector, the IMF was asked to have a recess in the programme while the authorities show growth in revenue in two to three months. Fortunately, revenue performance in July has been 24pc higher than the target. The rationalisation of power tariff subsidies has also been submitted to the power regulator for proper targeting and will be settled in a month or so, he added.
“So the Fund programme is currently in recess but hale and hearty,” the minister said, adding that dialogue with the IMF was also in progress on the Kamyab Pakistan Programme on which the Fund had certain normal and genuine concerns which were being addressed. He said revenue numbers for two-three months starting from June 2021 would be shared with the IMF soon for completion of its sixth review.
The Fund had raised some questions about the KPP and wanted their answers, but these could not be described as ‘misgivings’, he added. The questions pertained to the capacity of partner financial institutions and whether or not the government’s guarantee would be 100pc, but these were no big issues and would be answered through a two-way dialogue, he said.
The minister said the programme would not be rolled back as it’s the first-ever initiative taken for the poor and lower and middle classes and all risk mitigation measures had been put in place. He explained that agencies like Akhuwat, NRSP and Kashf had proven track record and had even delivered 99pc recovery rate during Covid-19 assistance. There would also be a proper oversight mechanism.
Conceding that the geo-political situation is not in Pakistan’s favour in terms of IMF’s engagements as had been a few years ago, Mr Tarin said the government was making honest efforts to show performance through structural reforms, increased revenues and improved power sector.
Responding to a question, he said he would soon share good news about Saudi oil facility. He also affirmed that inflation remained a challenge mainly because of higher food prices, role of middlemen and imported inflation. He said administrative actions to contain prices of sugar, wheat flour, ghee, etc, had been hampered by stay orders and the government was not creating strategic reserves through imports to flood the market.
The finance minister agreed that current account would be in the negative as growth picked up but would stay under 2.5pc of GDP unlike 6-7pc in the past. He also conceded that the Rs610bn revenue collection target through petroleum levy would not be achieved, but this would be compensated by some other sources which had not been disclosed in the budget. There would also be a major progress on the IPPs front to address some power sector challenges, he added.
Published in Dawn, August 13th, 2021