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IMF asks Pakistan to 'do more' to unlock next loan tranche

IMF asks Pakistan to 'do more' to unlock next loan tranche


IMF demands Pakistan to 'do more' to unlock next loan tranche

ISLAMABAD (Dunya News) – The International Monetary Fund (IMF) has demanded cash-strapped Pakistan to boost its revenue generation by imposing further taxes in order to secure the ninth tranche of the $7 billion loan programme stalled since September last.

It emerged after a round of technical talks between the Pakistani authorities and the IMF delegation, which is visiting Pakistan for the ninth review under the Extended Fund Facility (EFF), concluded on Friday. 

The South Asian country is reeling from economic instability due to sharp decline in foreign exchange reserves which are barely enough to cover less than one-month import. Fresh statistics show the reserves held by the State Bank of Pakistan (SBP) dropped to a precariously low level of $3.09 billion in the week ending on Jan 27 owing to external debt repayments.

Read More: 'Alarming level': SBP-led forex reserves drop to $3.09bn 

Reserves held by commercial banks stood at $5.65bn, taking the country’s total liquid reserves to $8.74bn, the central bank said.

Amid the gloomy economic situation, the government is scrambling to revive the IMF’s loan programme. It has also expressed commitment to meet the conditions of the global lender. The recent nosedive in the value of the local currency against the dollar is an outcome of the implementation of the IMF condition regarding removal of cap on the currency exchange rate.

Read More: Pakistani rupee hits new low against dollar in interbank market

Sources said the IMF had asked Pakistan to impose new taxes worth Rs500 billion to overcome circular debt and consequence of slow privatisation procession. It would be impossible to meet the expenses if new taxes were not imposed, the IMF delegation told the Pakistani authorities. It had also demanded immediate increase in levy on diesel to achieve the tax collection target.

Sources said a final decision about imposition of sales tax on petroleum products would be taken in the policy-level talks between both sides. The finance official will later present the demands of the global lender to Prime Minster Shehbaz Sharif for approval.

On Friday, PM Shehbaz, in his address to the apex committee in Peshawar, revealed that the IMF was giving tough time to Finance Minister Ishaq Dar and his team as its conditions were beyond imagination.

Saying Pakistan was facing tough economic challenges, he said there was no other option except implementing the conditions of the IMF to revive the loan programme.