IMF ‘satisfied’ with Pakistan’s measures for revival of loan package

ISLAMABAD: The International Monetary Fund (IMF) has expressed satisfaction over the measures taken by Pakistan for the revival $7 billion Extended Fund Facility (EFF) stalled for months, ARY News reported, citing sources.

According to sources, Pakistan and IMF held virtual negotiations for revival of loan program – stalled for months.

During the meeting, the lender expressed satisfaction over the country’s measures, while Pakistan insisted for early finalisation of the staff-level agreement.

Sources told ARY News that the negotiations were moving in a positive direction as the Fund did not place any new demands during the virtual session.

Sources claimed that the State Bank of Pakistan (SBP) apprised IMF representatives about the estimate collection of foreign exchange reserves of $10 billion till June. “Pakistan has also achieved future targets prior to the staff level agreement”, they added.

It is pertinent to mention here that the government has accelerated implementing IMF demands to unlock the loan tranche for the revival of country’s economy.

Earlier in March, Pakistan apprised the International Monetary Fund (IMF) of the implementation of demands for the revival $7 billion Extended Fund Facility (EFF) stalled for months.

Sources told ARY News that the officials from Ministry of Finance held talks with IMF and apprised it of the implementations of demands tabled for the revival if stalled loan programme.

IMF seeks implementation of demands before staff-level agreement

The International Monetary Fund (IMF) asked Pakistan to implement demands before reaching a staff-level agreement for the revival $7 billion Extended Fund Facility (EFF) stalled for months.

Sources told ARY News that the Fund asked the incumbent government to implement demands before reaching a staff-level agreement. Pakistan was facing a ‘tense situation’ like 1998 to revive the stalled programme, they claimed.

Sources further claimed that Islamabad was continuously receiving new Memorandum of Economic and Financial Policies (MEFP), while further demands were being tabled by amending the clauses of agreement. The IMF has tabled four more conditions before reaching a staff level agreement, sources claimed.

Monetary Policy

Earlier in the day, the State Bank of Pakistan (SBP) raised the monetary policy rate by 300 basis points to 20per cent – one of the pre-conditions of International Monetary Fund.

“This decision reflects deterioration in inflation outlook & its expectations amid recent external and fiscal adjustments. MPC believes this outlook warrants a strong policy response to anchor inflation expectations around the medium-term target of 5-7 percent,” the statement said.

“MPC noted that reduction in CAD is important but requires concerted efforts to improve the external situation. It emphasized that any significant fiscal slippage would undermine monetary policy effectiveness in the context of achieving the price stability objective,” the SBP added.

Increase in power tariff

Pakistan accepted another pre-condition of the International Monetary Fund (IMF) for the revival of $7 billion Extended Fund Facility (EFF) as the government agreed to increase electricity rates for consumers of K-Electric (KE) and agricultural community.

According to documents, the implementation of uniform tariff will increase electricity rates by an average of Rs3.21 per unit.

The residential consumers using over 100 will be charged Rs1.49 per unit and those consuming 700 units will pay Rs3.21 per unit. Meanwhile, the power tariff for temporary residential customers and industrialists will be increased by Rs4.45 per unit.

The government also decided to increase electricity rates by Rs1.55 for consumers on a quarterly basis. It has also been decided to increase the quarterly rate of customers from July 2022 to September 2022.

The federal government raised the power tariff for agricultural consumers and withdrew the subsidy under the Kissan package to meet International Monetary Fund (IMF) terms.

The subsidy given to agricultural consumers of Rs 3.60 per unit under the Kissan Package has been withdrawn. Agricultural consumers now have to pay Rs 16.60 per unit for power tariffs.

Ishaq Dar about IMF agreement

In a Twitter thread, Ishaq Dar said, “Anti-Pakistan elements are spreading malicious rumors that Pakistan may default. This is not only completely false but also belie the facts.”

He added, “SBP forex reserves have been increasing and are almost US$1 billion higher than four weeks ago despite making all external due payments on time. Foreign commercial banks have started extending facilities to Pakistan.”

“Our negotiations with IMF are about to conclude and we expect to sign Staff Level Agreement with IMF by next week. All economic indicators are slowly moving in the right direction,” concluded the finance minister.