Pakistan to seek ‘long, large IMF programme’

Mehtab Haider
Wednesday, Mar 13, 2024

ISLAMABAD: Federal Minister for Finance and Revenues Muhammad Aurangzeb said on Tuesday that Pakistan would seek a “large and long programme” from the IMF under the Extended Fund Facility (EFF).

The blueprint of the EFF programme and the possibility of augmentation will also be explored during the upcoming talks with the IMF. The minister conceded that price hike was the biggest issue and that macroeconomic stability would help reduce it gradually. He termed it a positive development that the CPI-based inflation had started witnessing receding trends. He also said the Monetary Policy Committee (MPC) is the domain of the State Bank of Pakistan (SBP), which currently enjoys autonomy but hoped that after inflation recedes, interest rates would also come down in future.

In the post-EFF agreement with the IMF, he said that Pakistan would fetch foreign inflows through commercial financing and launching international bonds.

“The Special Investment Facilitation is an important platform to bring equity and investment from abroad,” the minister said while talking to a select group of reporters here at the Q Block on Tuesday. The minister added that the era of securing deposits and rollover from friendly and bilateral partners is over, so viable and bankable projects will have to be put on the table.

All options, including augmentation of the IMF programme through climate financing and jacking up the size of allocated quota under the EFF programme, will be explored during the upcoming negotiations with the IMF review mission scheduled to be commenced soon, Muhammad Aurangzeb said.

He conceded that there was a trust deficit owing to which the IMF always proposed front-loaded programmes as they knew that after passing through the first or two reviews and getting money, we would run away from implementing the remaining programme. He said that Pakistan requested the IMF to conduct the second review under the SBA programme and release the last tranche. “I am quite confident that we will be able to agree to IMF’s stipulations,” he added.

This aside, he said he would also request to kickstart parleys for striking a new EFF programme in the upcoming talks.

The minister said that there was no luxury of wasting any more time so the country will have to go into “execution mode” to fix the structural bottlenecks. The plugging of leakages, bringing end-to-end digitization in FBR and fixing cash bleeding State Owned Enterprises (SOEs) are the top priorities agenda. He said that wholesalers, retailers, real estate and agriculture income would be brought into the tax net.

The IMF review mission is scheduled to visit Islamabad from March 14 to 18, 2024 to accomplish the second review and release of the last tranche of $1.1 billion under the Standby Arrangement (SBA) programme.

The minister categorically said that Islamabad will request the IMF for at least kick-starting parleys on a fresh bailout package under the EFF and will deliberate with the higher management of the Fund in April on the occasion of upcoming spring meetings of IMF/World Bank. He made it clear there was no magic wand available to fix the economic ills. There is no dearth of policy prescriptions but the government has decided to enter into the implementation phase instead of relying on studying issues. The macroeconomic stability will help reduce price hikes and slash down the policy rate.

Accompanied by Federal Secretary Finance Imdad Bosal and DG Media Finance Ministry, the minister for finance stated that he would hold both the portfolios of finance and revenues as earlier in the notification it was written that he would hold the portfolio of finance and would additionally look after revenues. The minister said that there was confusion after the notification, which was now settled.

Aurangzeb said that the structural benchmarks of the last four to five IMF programmes were similar. Instead of converting to “Debating Club”, the reform plan was Pakistan’s programme. He warned that if it was not done, Pakistan would continue doing the “patchwork” like earlier but could not steer the economy from the mess. He said the growth path achieved in the past resulted in the running away of foreign exchange reserves. Pakistan could not run with the tax-to-GDP ratio standing at 9 or 10 percent as there was an urgent need to turn it into double digits.

He said that the privatisation agenda would be pursued as the government should not be running the business rather its role should be restricted to providing a level playing field to private sector. Let the private sector assume the leading role, he added.

The finance minister said the Public Sector Development Programme would have to involve public-private partnership (PPP) and mentioned that Sindh had executed this model in Thar and asked why the federal government could not follow this path.