Upon making revisions to the budget in accordance with the International Monetary Fund’s (IMF) stipulations, the government is now anticipating a pivotal announcement from the global financier in the coming days for much-needed bailout funds.
An official stated that practically all the issues between the IMF staff and the Ministry of Finance had been addressed before the finance minister’s wrap-up speech on Saturday. He added that the announcement concerning the successful conclusion of the ninth review is now considered just a formality, falling within the IMF’s prerogative.
The official further clarified that it is now the responsibility of the IMF’s mission to determine the specific dates for the financier’s executive board’s approval and disbursement of funds. However, he conceded that it is not scheduled until June 30, when the $6.5 billion Extended Fund Facility agreed upon in 2019 is due to expire.
Last week, Prime Minister Shehbaz Sharif held successive meetings with IMF Managing Director Kristalina Georgieva in Paris. Substantial changes were made to the initial budget, presented on June 9, following a comprehensive parliamentary debate on the original budget.
The modifications entail an additional Rs215bn in tax measures, a Rs85bn reduction in spending, retraction of an amnesty on foreign exchange inflows, removal of import restrictions, a Rs16bn increase in BISP allocations, and the authority to raise the petroleum levy from Rs50 to Rs60 per litre.
Nonetheless, officials affirmed that the petroleum levy would not be increased on the first day of the next fiscal year, July 1. They also believe that the increase might not be necessary at all unless the consumption of petroleum products plummets significantly from the currently depressed level.
They added that discussions were underway with the Islamic Development Bank for maximum upfront disbursements from its already declared portfolio of over $4bn to maintain low foreign exchange reserves until IMF assistance comes through.
The lifting of import restrictions is also expected to be delayed due to upcoming holidays and inherent systematic and administrative holdups.
Imports worth more than $4bn need clearance against the total foreign exchange reserves of $8.86bn, which includes the central bank’s holdings of $3.54bn.
Esther Perez Ruiz, the IMF’s resident representative in Pakistan, did not respond to a request for comment. Following the budget announcement on June 9, she publicly criticized the budgetary measures, stating they missed the chance to widen the tax base more equitably.
Read: Pakistan’s Finance Minister Rebuffs IMF’s Budget Criticisms
Ms. Ruiz also expressed concerns that the new tax amnesty contradicted the Fund programme’s conditions and governance agenda, setting a dangerous precedent. She advised the government to fine-tune the budget before giving it the green light.
Pakistani authorities claim that these demands have since been addressed.
