The IMF is poised to ask policymakers for further fiscal and monetary tightening, as well as new taxation measures in the coming budget.
Pakistan and the International Monetary Fund (IMF) will begin talks in Doha tomorrow in an effort to get a staff-level agreement on the disbursement of a $1 billion tranche under the Extended Fund Facility (EFF).
“Pakistan’s delegation, led by secretary finance, will hold parleys with the IMF review mission, and after completion of the first round of technical talks, Minister for Finance Miftah Ismail is also expected to join the team in policy-level discussions. These talks will start on May 18 and will last till May 25 in Doha,” official Pakistani sources confirmed to The News.
In one of the most crucial rounds of negotiations for Pakistan’s economic team, Islamabad will have to persuade the IMF to revive a delayed $6 billion programme at a time when the government has yet to take steps to eliminate the unpaid fuel subsidy despite making a commitment to the fund.
If the coalition partners can reach an agreement, the government may propose eliminating the unfunded fuel subsidy.
According to the official, Pakistan’s negotiation delegation would include Secretary Finance, Additional Secretary, Ministry of Finance, External, Additional Secretary Budget, Additional Secretary C&F, Acting Governor SBP, and Deputy Governor, Chairman FBR, and Members IRS and Customs Policy Wings.
In order to avoid a balance of payment crisis, the government urgently needs IMF assistance due to depleting foreign currency reserves and exchange rate devaluation. The SBP’s foreign reserves were decreased by more than $6 billion, reaching $10.3 billion on May 6, 2022.
“We want to use it as a bargaining chip because we know that the IMF staff always stressed doing more. It is part of a strategy to move ahead if the IMF seems in a mood to move ahead,” said a Pakistani official said.
The IMF is poised to ask policymakers for further fiscal and monetary adjustments, as well as new taxation measures in the coming budget. The IMF has recommended Islamabad to increase the Federal Board of Revenue’s (FBR) tax collection target to 7,255 bn rupees for the next fiscal year, from the present objective of 6,100 billion rupees.
In the future monetary policy, the IMF recommends raising the policy rate by another 100 to 150 basis points.