IMF Bailout
ISLAMABAD: Finance Minister Muhammad Aurangzeb announced on Monday that the International Monetary Fund (IMF) Executive Board’s approval of a new bailout package for Pakistan is closely linked to the country’s efforts to re-profile $12 billion in debt with friendly nations.
According to reports, the minister stated that the re-profiling includes $5 billion from Saudi Arabia, $4 billion from China, and $3 billion from the United Arab Emirates (UAE), which is crucial for securing the IMF’s staff-level agreement.
During a press conference in Islamabad, Aurangzeb described the external financing gap as “manageable” and emphasized that the government seeks only to re-profile these foreign deposits over a three to five-year period.
This move comes as the Prime Minister Shehbaz Sharif-led government has recently reached a 37-month, $7 billion bailout program with the IMF.
However, this program is pending approval from the IMF’s Executive Board, which Aurangzeb expects to finalize by late August.
On the issue of debt related to Chinese Independent Power Producers (IPPs), Aurangzeb explained that the government has already begun the process of re-profiling this debt, seeking an extension in maturity.
He revealed that a Chinese consultant would be hired to assist in this process. The outstanding repayment to Chinese IPPs amounts to $15.4 billion, with Pakistan requesting an extension of the debt tenor by five to eight years.
The finance minister clarified that Pakistan is not seeking debt restructuring or a haircut but only an extension of the maturity period for both foreign deposits and Chinese IPPs debt.
Aurangzeb also noted that the government is in discussions with Chinese authorities about re-profiling the power sector debt, which follows a high-level visit to China by a delegation including himself.
He acknowledged Beijing’s support for Pakistan’s efforts to secure IMF approval and highlighted the need for Pakistan to engage with both China and the United States effectively.
In addition to addressing debt issues, Aurangzeb discussed the economic challenges faced by the country, attributing them to the previous government’s mismanagement, including increased interest rates, electricity prices, and taxes.
He criticized the expansionary budget and the derailment of the last IMF program during Imran Khan’s tenure, which led to a depletion of foreign exchange reserves and a trust deficit.
To address domestic financial issues, Aurangzeb outlined new tax measures, including a simplified Tajir Dost Scheme with fixed tax rates ranging from Rs100 to Rs60,000 a month.
He also mentioned efforts to crack down on tax evasion and improve tax enforcement, stating that a central system will be introduced to streamline tax collection and reduce duplication.
On rightsizing government ministries, Aurangzeb revealed plans to reduce annual expenditures, aiming for a 20% to 25% cut in the financial burden of ministries.
He emphasized the need for simplification in the tax system and a more effective enforcement mechanism to address issues such as fake invoices and tax evasion.
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