If Pakistani authorities wish to restart the frozen loan programme, they must take the listed precondition activities within the next three weeks, according to the International Monetary Fund (IMF).
The IMF advised the Pakistani government that “all necessary initiatives” must be taken at this time.
The deadline for carrying out all necessary steps to enable the release of a staff-level agreement and a $1 billion tranche under the Extended Fund Facility has been set at two to three weeks (EFF).
Ishaq Dar, the finance minister, is scheduled to speak with his core economic team in a few days to reach an agreement on the steps that must be completed in the next few weeks to clear the way for the resumption of the IMF programme.
Speaking with The News, a senior official on Friday confirmed that “now the ball is in Islamabad whereby the IMF asks the government to take actions on account of fixing the cash-bleeding energy sector including power and gas, taking additional taxation measures, and pursuing structural reforms in the remaining period of the Fund programme.”
The State Bank of Pakistan’s declining foreign exchange reserves, which fell to $6.11 billion, were taken into consideration as Pakistan and the IMF representatives held another round of virtual negotiations on Thursday. The finance minister gave the lender the assurance that Pakistan expected to receive dollar inflows from one friendly nation by late December or early January.
According to the sources, the Energy Ministry was urged by the Finance Ministry to modify the Circular Debt Management Plan (CDMP) for 2023.
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According to one official, “we cannot permit the imposition of a power surcharge in the range of Rs 31.60 or Rs 12.69 per unit hike, keeping in view the attached political cost,” and they added that the relevant authorities were tasked with developing the revised CDMP in such a way that Pakistan could increase the power tariff on the lower side.
In order to lessen its dependency on subsidies, the government could also increase efficiency and governance at the same time. The Ministry of Energy has consented to create an updated CDMP roadmap for 2022–2023 that is acceptable to the government and the IMF.
According to unbiased analysts, the government may want to walk a tightrope by taking a balanced approach.
The government would need to come up with a workable plan to eliminate the monster of the circular debt that has accumulated in both the power and gas sectors up to a staggering amount of Rs4 trillion because the restoration of the IMF programme through patchwork may not succeed.
The IMF has agreed to provide a Rs 340 billion adjustment for the budget deficit increase brought on by expenses connected to the floods in the current fiscal year.
The Fund has also urged Pakistan to take additional steps to close the huge gap preventing the achievement of the FBR’s envisioned goal. The FBR’s revenue collection goal of Rs 7,470 billion for the current fiscal year may not be met, according to the IMF’s assessment.