ISLAMABAD: With the implementation of all major prior actions, Pakistan is eyeing a staff-level agreement with the International Monetary Fund (IMF) this week which will also pave the way for much-awaited credit flows from other bilateral and multilateral lenders.

A day after the passing of the Supplementary Finance Bill 2023 in the National Assembly, the top economic team of the PMLN-led coalition government on Tuesday briefed the parliamentary committees on finance on all conditions agreed upon with the Fund.

State Minister for Finance Aisha Ghaus Pasha and Secretary Finance Hamid Yaqoob Sheikh responded to questions asked by the members of these committees in meetings held separately who have raised their concerns on modalities agreed upon with the Fund that could trigger a further spike in inflation.

MNA Qaider Ahmed Sheikh and Senator Saleem Mandviwalla chaired the meetings of the finance committees separately.

The secretary finance told the NA committee that the consultations with IMF are in the final stages. “We expect to conclude the consultations soon even within the week”, he further said.

Parliamentary committees briefed on conditions to revive $7bn bailout

However, the IMF Executive Board meeting is expected in the first week of March after the staff-level agreement has been reached. The secretary, however, did not give the timeline or exact date of the IMF board meeting.

He also hinted at the positive signals coming from international financial circles regarding the revival of the $7bn Extended Fund Facility (EFF) programme. However, Mr Sheikh did not elaborate further.

He said the staff-level agreement will pave the way to get funds from other international financial institutions.

The secretary categorically said it would take two to three months to settle the country’s economic challenges. He further informed the committee about a major rollover of loans is expected in a day or two while another one is in the ongoing week. However, the secretary did not disclose it.

“Let’s wait for things to clear up please”, the secretary said.

Answering a question, the secretary said that forex reserves numbers have been agreed with the IMF. However, the number could not be disclosed ahead of the agreement, he said, adding there has been positive news regarding the staff-level agreement in the international media.

Aisha Ghaus also spoke about the IMF talks and informed the NA standing committee that the fund has identified a fiscal gap of Rs875bn.

This was to be filled through tax and non-tax measures. The bulk of the gap is because of the energy sector slippages.

FBR has been given an additional task of collecting Rs170bn over the budgetary target of Rs7.470 trillion. The remaining amount will be raised through an increase in natural gas as well as electricity rates. However, the break-up was not shared with the committee members.

Miss Pasha agreed that the government needs to do structural reforms. She also agreed to reduce the bulk of unnecessary cabinet members.

At the Senate Standing Committee, she said that all prior actions with the IMF were implemented. Under this, subsidies will only be allowed to poor people.

Regarding further raise in interest rates, the minister said that it was the domain of the State Bank of Pakistan.

The minister ruled out the possibility that Pakistan could default on its external debt. “People should not pay any heed to the propaganda of bankruptcy,” she said. Islamabad has fulfilled all its international obligations and would also do so in the future.

Appointing bank heads

The National Assembly Committee expressed its dissatisfaction with the delay in appointing heads for the National Bank of Pakistan (NBP) and Zarai Tarqqiati Bank Ltd (ZTBL) despite lapsing of nearly a year.

The secretary finance replied that the appointments of NBP and ZTBL heads are the prerogative of the federal cabinet.

Meanwhile, the committee recommended a comprehensive super tax applicable to all entities, which would be based on the limit of profits, as proposed by the FBR.

The committee also demanded a progress report from the authorities concerned on the measures taken to ensure the investigation of banks involved in exchange rate manipulation.

The committee suggested that the Finance Division and the FBR formulate policies designed to bolster domestic industries that rely on the importation of raw materials from international markets and to aid importers in clearing their commodities from customs authorities.

In response to a proposal for amnesty schemes aimed at enhancing the inflow of dollars, the government declined the offer because such a measure would cause Pakistan to once again enter into the blacklist of the Financial Action Task Force.

During the meeting, the FBR chairman expressed confidence that the agency is pursuing the correct course of action to collect the anticipated tax revenue of Rs7.47tr for the current fiscal year.

Published in Dawn, February 22th, 2023

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