Pakistan, IMF strike $6b deal: Sheikh
Agreement awaits formal approval by IMF board; Pakistan will get the bailout package over the course of three years
Pakistani technical teams have reached an agreement with the International Monetary Fund (IMF) on a bailout package, Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh announced on Sunday.
Speaking on state-run news channel, he said Pakistan would receive $6 billion worth of assistance under the IMF programme for a period of three years.
Shaikh said the agreement now awaits a formal approval to be given by the IMF board.
The finance ministry had approached the IMF in August 2018 for a bailout package, whereas last month, the then finance minister Asad Umar announced that the two sides had — more or less — reached an understanding on a package for bailing out the country’s ailing economy.
“In the next step, the IMF will send its mission to Pakistan in the next few weeks to work out technical details. But in principle, we have reached an agreement,” he had said. However, Umar was removed from the post in a dramatic move and was replaced with Dr Shaikh — an internationally renowned economist.
Dr Shaikh served as the finance minister from 2010 to 2013 during the PPP government’s rule. During his tenure as federal minister, Dr Shaikh completed 34 sale transactions worth Rs300 billion in banking, telecom, electricity, and manufacturing.
Subsequently, an IMF employee Dr Reza Baqir was appointed governor of the State Bank of Pakistan (SBP) to serve for a three-year term. The Chairman Federal Board of Revenue was also changed in a sudden move.
Earlier, Prime Minister Imran Khan had reportedly raised concerns over the draft of a staff-level agreement between International Monitory Fund and government citing inflation concerns.
The talks between the government and the global lender for a proposed bailout package continued in the capital on Sunday.
Both side had made “good progress” in their discussions on Friday for a loan agreement while Adviser to PM on Finance Abdul Hafeez Sheikh and other officials called on the prime minister and apprised him of the bailout package and the global lender’s conditions.
The premier had also directed officials to convince the global lender to reduce target of tax collection, besides further relaxation with regard to tax exemption.
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.
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.