ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan to implement demands before reaching a staff-level agreement for the revival $7 billion Extended Fund Facility (EFF) stalled for months, ARY News reported on Tuesday, citing sources.
Pakistan and International Monetary Fund (IMF) are expected to make progress on the revival of the loan programme as their virtual talks for staff-level agreement would be held on March 2.
However, sources told ARY News that the Fund has 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, adding that the government was forced to implement surcharge of Rs3.82 on electricity permanently instead of four months.
Meanwhile, the Fund also demanded to increase interest rate ahead of staff level agreement. In this regard, the State Bank of Pakistan (SBP) preponed its Monetary Policy Committee on March 2 — two weeks earlier than scheduled.
The lender insisted that the country’s interest rate should be in line with inflation – a demanded which has been agreed by the incumbent government.
Sources also claimed that the IMF has also demanded written assurance on external financing. Apart from China, no clear commitment was made from any friendly country, sources added.
Read More: Staff-level agreement: Pakistan, IMF to hold virtual talks on Mar 2
Sources claimed that the Ministry of Finance has expressed displeasure over the role of Foreign Ministry in the revival of stalled programme.
Big increase in Monetary Policy
The International Monetary Fund (IMF) demanded a big increase in interest rates.
Pakistan has been constantly pressurized to take important measures on time and the IMF demanded strict monetary policy which may result in the hike of interest rates as well.
Sources said that the State Bank of Pakistan (SBP) sold T-bills worth 258 billion USD on February 22 and the interest rate of the state bank is 17 percent.
IMF statement
Meanwhile, the International Monetary Fund (IMF) issued an official statement following the conclusion of the 9th review talks on the stalled loan program.
IMF mission chief Nathan Porter, in a statement, said that the timely and decisive implementation of policy measures along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development.
The statement, issued after the mission concluded its 10-day Pakistan visit, welcomed Prime Minister Shehbaz Sharif’s commitment to implement policies that are required to “safeguard macroeconomic stability”. He also thanked the leadsfor the “constructive discussions”.
Read more: Pakistan-IMF talks fruitful, announcement due shortly: sources
The IMF chief noted “considerable progress” was made during the talks with Pakistani officials on “policy measures to address domestic and external imbalances”.
The IMF mission chief said that the “virtual discussions” will continue between the two sides in the coming days to finalise the “implementation details” of the policies.
READ: IMF DEMANDS RECORDS OF PAKISTAN’S FLOOD RELIEF EXPENDITURES
‘Tough conditions’
International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs600-800 billion in additional taxes in the second round of talks to revive $7 billion Extended Fund Facility (EFF).
During the meeting, the Fund set tough conditions for additional measures that included imposing roughly Rs600-800 billion in additional taxes.
Read More: IMF conditions: Govt asks public servants to declare assets
Sources told ARY News that Pakistan was willing to impose taxes to the tune of Rs200 billion through a ‘mini-budget’, while the Fund pressed Islamabad to foist over Rs600 billion additional taxes.
The lender also demanded the government increase tax collection to 1 percent of Gross Domestic Product (GDP). Sources claimed that the Fund demanded the government fix next fiscal year’s tax collection target at Rs8.3 billion.
Read More: ‘Mini budget’: Govt likely to impose additional duty on luxury goods
Sources further claimed that the IMF also demanded to end phase-wise incentives of sales tax. It also demanded to increase sales tax on petrol from 11 percent to 17 percent, sources said, adding that Fund demanded to end Rs110 billion relief granted to textiles and other industries.
