ISLAMABAD: The International Monetary Fund (IMF) has sought copies of financial agreements with the provincial governments and other details from the federal government to confirm the financing of discounts on electricity and petroleum products announced by Prime Minister Imran Khan, Finance Minister Shaukat Tarin disclosed at a press conference on Sunday.

The talks with the IMF were earlier scheduled to conclude on Friday last but then “they [Fund staff] wanted to see agreements with the provinces to basically reassure we are not involved in aerial firing” on financing of PM’s relief package for petroleum prices, the minister said.

Mr Tarin made it clear that there were no more outstanding issues, as they only wanted to ascertain the sources of funding to cover the cost of reduction in electricity and petroleum products. They were assured the package would be covered through provincial shares and dividends of the state-owned entities, he said. “They said show us agreements with the provinces,” he remarked.

The federal government has signed rolling memorandums of understanding with the provinces to provide cash surplus every year to show lower consolidated fiscal deficit but are sometimes remain unhonoured when provinces also go into overdrafts.

“So there is no problem. We already have agreements that we will show them” when the two sides would meet again on Monday, the minister said, adding he would hold a final policy round up with the fund mission on Tuesday.

The two sides will then finalise the Memorandum of Economic and Financial Policies (MEFP) amicably and take it to the executive board on a convenient date.

After initial compliance with the commitments made with the IMF in December 2021 to increase petroleum levy and power tariff, PM Khan reversed the progress by announcing Rs10 per litre reduction in petroleum products bringing down levy to zero besides a cut in electricity rates by Rs5 per unit instead of a schedule of increases agreed to with the IMF to address circular debt.

Up to 700,000-tonne wheat import

Responding to a question, Mr Tarin said all the provinces were part of the minimum wheat support price at Rs2,200 per 40 kg approved by the Economic Coordination Committee (ECC) of the cabinet last week — about 13 per cent higher than Rs1,950 of last year and showed confidence to exceed procurement target that was also set at 6.9 million tonnes last week.

He said the wheat production was then estimated to be 5pc to 6pc higher and may not require imports except 500,000 to 700,000 tonnes for strategic reserves. “I would like to increase strategic reserves from 1.8 million tonnes to two million tonnes, depending on international prices,” he said, adding he would not burn foreign exchange if international wheat prices remain higher.

In response to a question about former PML-N finance minister Miftah Ismail’s statement that the country could not launch international bonds as Pakistan’s bond yields had gone high due to economic policies and fundamentals, Mr Tarin said his statement would not change ground reality. This was not Pakistan specific but with entire developing countries including Turkey, Indonesia and others, he remarked.

Mr Tarin said financing was not an issue but the interest rates being offered were higher. He said he still had $4-5bn worth of offers from banks, but “why should I take expensive loans?” Mr Miftah should also recall they had left the government with just one-month import financing that now stood at $16.6bn – against average monthly imports of about $7bn in eight months, he added.

Responding to a question whether he would continue as finance minister in the next government if asked, Mr Tarin said he was a man of principles and would at no cost do that as he was a PTI senator. “I will remain finance minister if the PTI government stays, otherwise will go home. I am not a renegade,” he said.

He expressed the hope that 5pc economic growth rate was expected despite various headwinds this year, as some sectors were also showing robust growth including large-scale manufacturing, agriculture and exports. “This shows there is thrust in the economy and momentum is returning,” he said, adding that this did not mean there were no headwinds but policy adjustments would continue to absorb them.

“The welcome news is that the LSM has grown by 8.2pc in January against same month of last year and 4.2pc against December 2021,” he said, adding the LSM growth had slowed down in August and September 2021 but the trend had reversed. “Our economic growth momentum has picked up again as all agriculture crops are growing at 6 to 12 percent, and exports and services sectors are also growing at a high pace,” the minister pointed out.

Published in Dawn, March 21st, 2022

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