Senior officials from Pakistan and the IMF started a round of talks on Friday in a last-ditch effort to iron out disparities in budgetary estimates, with the former expecting a breakthrough within the next 72 hours.
To persuade the Fund to continue the program, the government took the strongest measures to terminate fuel subsidies, raising POL [petrol, oil, and lubricants] prices to unprecedented levels.
Despite the fact that Islamabad has become a “desperate borrower” due to the scarcity of foreign currency reserves, the IMF continues to insist on providing more.
The IMF staff has not yet shared the initial draught of the Memorandum of Financial and Economic Policies (MEFP) with Pakistani authorities, according to top government sources who spoke to The News on Friday.
Another session between Pakistan and the IMF is now planned for Saturday (today) in order to progress toward the intended goals.
The sharing of the draught MEFP is a requirement for moving forward with the signing of the staff-level agreement because it provides a framework on which both sides can reach an agreement.
This signed document, duly signed by the Minister of Finance and the Governor of the Central Bank, is then forwarded to the IMF’s Executive Board for approval to complete the pending review and release the next tranche.
Finance Minister Miftah Ismail held a virtual meeting with the IMF’s Mission Chief on Friday evening, which was also participated by the director of IMF dealing with Pakistan, and both sides made some ‘good progress toward developing a consensus on MEFP, according to one top official.
On Thursday, the Minister of Finance and Minister of State for Finance met with the US ambassador, according to a top Finance Division official.
However, this would be insufficient because Islamabad would need to develop ‘contacts’ with senior US Treasury officials in order to secure the necessary support after reaching an agreement on a framework on which both parties could move through with signing the MEFP paper.
“Without broader agreement on the basis of framework, no one could help Pakistan,” the official added, citing an example in which once the framework was agreed upon, Washington’s assistance could be requested on one or two key remaining issues between the two parties.
They believed that in the past if both sides couldn’t reach an agreement on the exact fairness of the exchange rate, significant countries like the US or the EU could be enlisted to help.
Revised Personal Income Tax (PIT) rates for the salaried class, projection of an Rs. 750 billion petroleum levy, working out of power sector subsidies, and Utility Stores Corporation (USC) subsidies for the next budget were among the lingering concerns between the two sides.
To read our blog on “FBR updates tax rates for seven tax brackets and reports them to the IMF,” click here.
