The International Monetary Fund (IMF) and Pakistan are scheduled to begin review discussions on Tuesday to reach a staff-level agreement for the release of a $1 billion tranche under the Extended Fund Facility (EFF).
They will begin on Wednesday (tomorrow) and last for a week in Doha.
Even after forging an agreement with the IMF, Islamabad will have to persuade the Fund to restart a $6 billion programme that has been inactive for some time.
If the coalition partners can agree, the government may eliminate the unpaid gasoline subsidy. Using it as a negotiation chip, we know the IMF staff has always emphasised doing more. It’s all part of a plan to go forward if the IMF shows signs of doing so, according to a senior official.
The International Monetary Fund (IMF) is preparing to press policymakers for more fiscal and monetary policy tightening. Additional taxing measures will be recommended in the next budget.
According to Islamabad’s request from the IMF, the FBR’s tax collection goal of Rs6,100 billion for the current fiscal year should be increased to Rs7,255 billion for the next budget of 2022-23. This impending fiscal policy should also see an additional 100-150 basis point hike in policy rates from the IMF.
For the first fortnight of May 2022, the Ministry of Petroleum estimates that PDCs would cost Rs118.6 billion, with an additional Rs63.32 billion expected for the second half of the week, from May 16 to 31, 2022. This includes Rs55.48 billion for the first fortnight, from May 1 to 15, 2022.
An Rs37 per litre price for MS petrol and high-speed diesel will be in force for the next 15 days, while the price of kerosene will rise to Rs50.89 per litre and the price of light diesel oil will rise to an Rs71.06 per litre as of May 16, 2022.
Following the first round of technical consultations, Finance Minister Miftah Ismail will join Pakistan’s delegation for policy-level meetings with the IMF review mission, which will be chaired by Pakistan’s Secretary of Finance.
Official sources tell that discussions will begin on May 18 and extend through May 25, 2022, in Doha, Qatar.
Officials from the Ministry of Finance, Federal Board of Revenue, and State Bank of Pakistan will be part of Pakistan’s negotiating team, according to the official, which will also include the Secretaries of Finance and Additional Secretaries from those agencies, as well as the Ministry’s External Secretary and Additional Secretaries from the Budget and C&F departments. A few Ministry of Energy and Power officials will use zoom to take part in the meeting.
As the country’s foreign currency reserves have dwindled and the exchange rate has depreciated, the government urgently needs the IMF’s support to avoid a balance of payments catastrophe. The SBP’s foreign reserves dropped from $10.3 billion on May 6, 2022, to a little under $6 billion.
When reached on Monday, the IMF’s resident head in Pakistan stated, “We stay regularly engaged with the government on policies to support macroeconomic stability in Pakistan. Staff from the International Monetary Fund will arrive in Doha on May 18 to begin a mission with Pakistani officials.”
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