IMF asks Pakistan to meet demands within three weeks to revive stalled programme

• IMF shares prerequisites list asking implementation in 15-20 days.
• Implementation could pave way for releasing of a $1 billion tranche.
• IMF to grant a Rs 340 billion adjuster because of floods.

ISLAMABAD: The International Monetary Fund (IMF) has shared lists of prerequisite actions asking Pakistani authorities to move towards implementing them in the next three weeks if they want to revive the stalled loan programme.

The IMF told the Pakistan authorities that the time has come to take “all required actions.” 

A timeframe of two to three weeks has been given for implementing all required actions paving the way for a staff-level agreement and releasing of $1 billion tranche under the Extended Fund Facility (EFF).

Finance Minister Ishaq Dar is expected to hold consultations with his core economic team in a couple of days for evolving consensus on required actions to be taken in the coming few weeks to pave the way for the revival of the IMF programme.

Talking to The News, a top official confirmed on Friday, “now the ball is in the court of Islamabad whereby the IMF asks the government to take actions on account of fixing cash-bleeding energy sector including power and gas, taking additional taxation measures and pursuing structural reforms in the remaining period of the Fund programme.”

On Thursday, Pakistan and the IMF officials held another round of virtual talks, in which the finance minister assured the lender that Pakistan was expecting to receive dollar inflows from one friendly country by late Dec or early Jan, keeping in view dwindling foreign exchange reserves held by the State Bank of Pakistan that nosedived to $6.11 billion.

The sources said the Finance Ministry asked the Energy Ministry to revise the roadmap for trimming the Circular Debt Management Plan (CDMP) for 2023.

One official told, “we cannot allow the imposition of power surcharge in the range of Rs 31.60 or Rs 12.69 per unit hike, keeping in view the attached political cost,” adding that the relevant authorities were assigned to come up with the revised CDMP in such a way where Pakistan could revise the power tariff upward on the lower side.

At the same time, the government could also improve efficiency and governance to reduce reliance on subsidies. The Ministry of Energy has agreed to develop a revised roadmap for the CDMP for 2022-23 acceptable to both the government and the IMF.

Independent analysts say that it could be the government's wish list to move towards the tightrope by striking a balanced approach. 

However, the revival of the IMF programme through patchwork might not work, so the government would have to devise a viable plan to erase the monster of the circular debt piled up in both the electricity and gas sectors up to a whopping figure of Rs4 trillion.

The IMF has agreed to grant an adjuster of Rs340 billion for hiking the budget deficit because of flood-related expenditures in the current fiscal year. 

The Fund has also asked Pakistan to take additional measures to bridge the yawning gap for materializing the FBR’s envisaged target. The IMF has assessed that the FBR might not achieve the revenue collection target of Rs7,470 billion for the current fiscal year.

The IMF also expressed concerns that the number of filers so far stood below three million income tax filers as it stood at 2.913 million against 3.4 million received in the last fiscal year. 

The FBR high-ups apprised that companies would file the corporate returns by December 31, 2022, so the number of received filers might further go up.

The government could take additional taxation measures by slapping additional customs duties and granting another tax amnesty scheme belonging to the merged districts of FATA/PATA. 

On account of nontax revenues, there is a shortfall on the Petroleum Development Levy, and the government is considering getting the banking sector lofty profits as dividends which they earned through currency manipulation in recent months. 

It was one of the options, said the sources, adding that the government would also increase the Petroleum Levy on diesel in the coming months to maximize revenue collection.