ISLAMABAD (Web Desk/Dunya News) – The International Monetary Fund (IMF) on Thursday praised Pakistan for the steps taken to bring economic stability to the country, but at the same time, called for adopting even stricter policies to achieve the ultimate goal.
The advice came as an IMF delegation started the final review process of the current $3 billion Stand-By Arrangement (SBA) which will pave the way for the release of the remaining amount $1.1bn for the cash-starved country.
IMF Mission Chief Nathan Porter is leading the Washington-based institution’s team which arrived at the Ministry of Finance as part of the four-day stay in the federal capital.
The first day of the IMF review started with Finance Minister Muhammad Aurangzeb, State Bank of Pakistan (SBP) Governor Jameel Ahmad and Federal Bureau of Revenue (FBR) Chairman Malik Amjed Zubair Tiwana briefing the visiting team on different aspects of the current situation and shared the government priorities.
Later, the IMF team left the ministry after attending the preliminary session as the two sides will hold multiple rounds of talks till March 17.
During the briefing, the Pakistani side assured the IMF of meeting the revenue generation target set for the current fiscal year without introducing any new taxes, as the FBR chairman shared a plan on the subject.
On the other hand, sources say the IMF team in a separate meeting demanded increasing the gas tariff for the fertiliser sector at the earliest, which is currently getting supply at subsidised rates, as the Washington-based top lender is focused on energy sector reforms, including dealing with the circular debt issue.
Boosting tax collection is the main IMF focus with an aim to reduce budget deficit. It has been pressing for several tough conditions, especially energy tariff hikes, which not only triggered but also sustained record-high inflation in the country.
Coupled with high borrowing costs, the cost of doing business has now reached a level where even sustaining a business and remaining competitive in the market is now a Herculean task.
Meanwhile, Aurangzeb told the visiting team that the government was formulating and implementing economic policies in close collaboration with the IMF.
It was on July 13 last year that the IMF transferred $1.2bn to the SBP as first tranche under the agreement that was approved by the IMF Executive Board a day earlier.
Later, the first successful review was done in November 2023, following which Pakistan received another $700 million after the IMF Executive Board approved the staff-level agreement.
Read more: Stocks slide as market fears sustained interest rates in the coming months
Earlier on Wednesday, the finance ministry said Pakistan had met all the targets set under the deal negotiated with the IMF. “This would be a final review of SBA, and a staff-level agreement is expected after this appraisal,” it said.
Once a staff-level agreement is reached, the final tranche of $1.1 billion will be disbursed, following the approval of IMF Executive Board, the ministry added.
Meanwhile, Aurangzeb, who had earlier described a new deal with the IMF essential for Pakistan’s economy, has made it clear that the government would aim at a longer and larger programme with the world’s top lender.
Talking to reporters and media channels in separate sittings, Aurangzeb said expanding the IMF programme through climate financing and jacking up the size of allocated quota under the EFF (Extended Fund Facility) would be goal during the upcoming negotiations with the IMF review mission.
The finance minister said Islamabad will be "very keen to start discussions on another EFF with them during these talks," adding that further negotiations on the larger, longer programme would be taken forward on the sidelines of the IMF and World Bank's spring meetings in April in Washington.
Aurangzeb listed inflation as the biggest challenge for the masses. But he repeated the same stance that macroeconomic stability would help arrest the trend gradually – a promise that hasn’t been fulfilled despite taking all the steps suggested by the IMF.
He also talked about interest rate cuts, but added that the subject falls within the State Bank of Pakistan (SBP) domain, which currently enjoys complete autonomy.
The newly-appointed federal minister also talked about the plans to expedite the privatisation process and expressed his confidence that the IMF would release the last tranche of $1.1 billion under the existing plan.
Aurangzeb, at the same time, highlighted the importance of starting talks to clinch another IMF programme at the earliest and mentioned the steps to be taken for enhancing revenue collection – the main focus and demand of the Washington-based lender.
He said the government would soon move towards to fully realising the potential of taxing the wholesale businesses, real estate and agriculture as well as focusing on public-private partnership model for development.