Pakistan, IMF make headway in talks over bailout agreement

ISLAMABAD: The Government of Pakistan and the International Monetary Fund (IMF) made a headway on Friday in discussions over a bailout agreement, the Ministry of Finance said in a statement.

The two sides held talks in Islamabad today, after which the Ministry of Finance said they had made "good progress" in their discussions. "Consultations will continue over the weekend," it added.

Sources in the Ministry of Finance earlier informed that Pakistan and IMF were close to finalising a staff-level agreement expected to range between $6-7 billion.

Under the proposed bailout agreement, Pakistan would have no choice but to concede to the IMF’s demands to hike power tariffs and taxes and withdraw tax concessions and exemptions - which are among the conditions that the country has accepted to secure the loan.

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According to the ministry sources, the government would increase the costs of electricity and gas for the consumers in two phases within this year. New taxes amounting to Rs700 billion would be revealed in the budget for the next fiscal year, to be announced on June 11.

Budget deficit would be restricted to 4.5 percent, whereas the revenue target for the Federal Board of Revenue would be set at around Rs5.3 trillion. Interest rate would be brought up to 12 percent. 

Under the proposed agreement, the government would not control the rate of the dollar, and subsidies in the energy sector as well as other sectors would be withdrawn. 

Furthermore, the plan to privatise institutions incurring losses would be shared with the IMF. 

The IMF and the Ministry of Finance would release a joint press statement if the agreement is finalised. If no agreement is reached, both the sides would issue separate press releases, the sources added.