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July 2, 2023July 2, 2023

IMF Agreement Is Not A “Magic Cure,” Claims Shehbaz

July 2, 2023 / By Zunair Tahir / Pakistan News

Prime Minister Shehbaz Sharif stated that the current arrangement is not a panacea and that he hopes it would “be the last one” shortly after the government received a much-needed $3 billion short-term financing package from the IMF.

A Friday IMF accord was set to expire only hours before the new nine-month standby agreement was announced. Now, the IMF’s board must approve the staff-level agreement with Pakistan later this month.

Although the accord provided a “much-needed breather,” Prime Minister Sharif stated he hoped this new program would be “the last one.”

Hours before the last package’s expiration, a nine-month standby agreement is announced;
The IMF board must approve a $3 billion package later this month.
Despite his insistence that loans do not build nations, the PM calls the current agreement a “much-needed breather.”

“This is not a time for arrogance, but rather for reflection on reality. Do countries manage without loans? Let’s pray that this is the last time we obtain a loan from the IMF and that we won’t need to do so in the future, he said to the media in Lahore on Friday after the agreement was reached.

The conversations he had last week in Paris with IMF Managing Director Kristalina Georgieva were characterized by him as a “turning point” in a string of recent negotiations with the international organization.

As it struggles to pay off debilitating external debt, the economy is experiencing a balance of payments crisis, and months of political unrest have discouraged foreign investment.

The country is struggling to afford imports as a result of skyrocketing inflation, the rupee’s record low against the dollar, and a country-wide decrease in industrial production.

“I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month standby arrangement in the amount of SDR 2,250 million (about $3bn),” IMF mission leader Nathan Porter said in a statement late Thursday.

According to Mr. Porter, the agreement will be evaluated by the IMF executive board by mid-July.

Since last November, the administration has been trying to satisfy the terms of the bailout arrangement by making hurried modifications to the national budget. According to Mr. Porter, it ended on Friday, and the new pact builds on the IMF’s initiatives under the earlier accord.

A $1.1 billion advance payment would be made under the revised agreement, according to Finance Minister Ishaq Dar, immediately after the IMF board meeting this month.

The agreement will also make other finance available on a bilateral and international basis. Saudi Arabia, the UAE, and China, longtime friends, have already committed or extended billions in credit. The IMF stated that this “will support near-term policy efforts and replenish gross reserves.”

According to Tradeweb statistics reported by Reuters, Pakistan’s sovereign dollar bonds were trading higher after the announcement, with the 2024 issue seeing the greatest gains, up more than 8 cents at little above 70 cents in the dollar.

Shorter-dated bonds had the biggest increases, showing ongoing doubts about the nation’s longer-term budgetary picture.

Later, on Friday night, PM Shehbaz tweeted that the new IMF agreement was a “much-needed breather” that will aid the nation in achieving economic stability. He stressed, nevertheless, that “loans are not used to build states. I ask God that this new program will be the last.

Miftah Ismail, a former finance minister, wrote in a tweet, “We must acknowledge that this IMF accord affords us yet another opportunity to make significant reforms. The people of Pakistan will continue to suffer for the structural and governance failings of their governments if we don’t implement these changes, leaving Pakistan at the mercy of multilateral lenders.

Pakistan’s poor progress in fulfilling the conditions set forth by the IMF for an agreement has drawn criticism from Michael Kugelman, head of the South Asia Institute at the Wilson Centre.

He stated that Islamabad has postponed politically hazardous fiscal policy actions that the IMF had been hoping to see for months.

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Dar Again Eliminates The Option Of A Default

June 3, 2023 / By Zunair Tahir / Pakistan News

Reforms are promised by the finance minister for “long-term improvement” of the nation.

Ishaq Dar, Pakistan’s finance minister, again ruled out the idea of a default on Saturday and pledged that changes are being prepared for the “long-term improvement” of the nation.

The finance czar promised to work with other government officials to help the nation overcome its present economic difficulties while speaking to a delegation from the Karachi Chamber of Commerce and Industry in Islamabad.

Finance Minister Senator Mohammad Ishaq Dar met a delegation from KCCI led by Mr. Zubair Motiwala at FBR,today and discussed budget 2023-24 proposals. FM appreciated KCCI in its pivotal role in the promotion and growth of the economy. (1/2).. pic.twitter.com/SuyCwI9V6W
— Ministry of Finance (@FinMinistryPak) June 3, 2023

Dar said that the Ministry of Finance will start a revolution in agriculture and create a sovereign wealth fund. He added that he is committed to take actions that have previously been disregarded and that the IT industry would also be a priority of his.

The group was also told by the finance minister that there is “no technical justification” for the IMF program’s postponement, which is unprecedented.

He insisted that Pakistan was an independent nation with trillions of dollars’ worth of assets.

Dar said that the nation has over $100 billion in foreign liabilities, but just one asset, its gas infrastructure, is valued between $40 and $45 billion.

The business sector was also urged by the finance minister to make fair expectations for the 2019 budget, and the administration promised to work with them.

Dar’s remarks came a day after a cabinet member said that Pakistan’s request to lessen the need of arranging $6 billion in new loans had been denied by the global lender, leaving the government with little choice except to attempt to resurrect the arrangement.

Minister of State for Finance Dr. Aisha Pasha stressed that Pakistan’s only choice was to return to the IMF in a policy statement delivered at the National Assembly Standing Committee on Finance.

Dr. Pasha claims that Pakistan asked the IMF to take into consideration lowering the $6 billion external funding demand based on fresh data on the current account deficit, but the Fund declined. The other $3 billion was to be arranged after the staff-level agreement, she said, but the IMF insisted on “demonstrating the $6 billion.” She went on to say that there was an understanding to arrange $3 billion before the agreement.

The statement from the ministry of finance shows that the IMF has not altered its position despite a call from Prime ministry Shehbaz Sharif to IMF Managing Director Kristalina Georgieva.

The IMF has already paid out $3.9 billion of the overall $6.5 billion rescue package during the previous four years, with the remaining amount depending upon the conclusion of three outstanding assessments.

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PM Says That All Conditions Have Been Fulfilled, But IMF Wants “More Guarantees”

April 16, 2023 / By Zunair Tahir / Pakistan News

The International Monetary Fund (IMF) has no reason to put off approving the staff-level agreement after receiving financial guarantees from allies, according to Prime Minister Shehbaz Sharif on Saturday. However, a Fund official said the lender was looking forward to receiving “necessary financing assurances” as soon as possible to clear the way for the conclusion of the ninth review of the $7 billion program.

IMF Mission Chief to Pakistan Nathan Porter made the announcement a day after Finance Minister Ishaq Dar confirmed $1 billion in bilateral financial help for Pakistan, which is thought to be the last preparatory action for staff-level agreement with the international lender.

PM Shehbaz remarked, “The IMF had set a condition for us to arrange funds from friendly countries before it signed a staff-level agreement with us,” while speaking at an event in Lahore. We worked hard for one and a half months to achieve the IMF’s final need by first getting a rollover of $2 billion from China and then $3 billion from Saudi Arabia and the UAE.

The premier complimented Bilawal Bhutto-Zardari and Ishaq Dar for their “hard work” in this respect and stated that “the new army chief made efforts to acquire the funds from Saudi Arabia and the UAE.”

He expressed the resolve to overcome these obstacles by reaching an agreement with the international lender as quickly as possible, despite the fact that his administration “inherited an IMF agreement that was in tatters.” There was “no alternative,” he said, therefore the government had to accept the strict requirements established by the IMF.

The Fund, meantime, praised Pakistan’s receipt of bilateral aid but pressed Islamabad for more guarantees to finalise the agreement.

The agreement to retain strong policies and find adequate funding to assist the implementation efforts was reached during talks between the Pakistani delegation and IMF employees and management, the statement added.

In contrast to an earlier government declaration that the pledge of $2 billion from Saudi Arabia and $1 billion from the UAE would address the issue, an official source noted that the Fund is still waiting for assurances from friendly nations. In addition, Mr. Dar said that the State Bank had received the final payment of $300 million from the Industrial and Commercial Bank of China on its $1.3 billion loan.

Kristalina Georgieva, the chief of the IMF, had hoped Pakistan would finish its current plan.

Finance Minister Senator Mohammad Ishaq Dar held a meeting with Mr. Jin Liqun, President Asian Infrastructure and Investment Bank (AIIB) virtually through video link from Islamabad as part of the IMF/World Bank Spring meetings 2023, (1/2)… pic.twitter.com/8lHdLXnsXJ
— Ministry of Finance (@FinMinistryPak) April 15, 2023

At a news conference in Washington, she stated, “My hope is that with the goodwill of everyone and with the implementation of what has already been agreed upon by the Pakistani authorities, we can complete our current program successfully.”

Separately, as part of the IMF/World Bank spring meetings, Mr. Dar conducted a virtual discussion with Jin Liqu, the president of the Asian Infrastructure and Investment Bank (AIIB), through a video link.

According to a formal statement, Mr. Dar informed the AIIB president on the government’s economic objectives and reforms for sustainable development while also sharing the present economic prognosis.

According to the release, the AIIB president praised the bank’s partnership with Pakistan.

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Interbank Rupee Declines By Almost Rs19 versus The Dollar Due To IMF Delays

March 3, 2023 / By Zunair Tahir / Pakistan News

On the interbank market on Thursday, the Pakistani rupee plunged drastically by Rs18.74 versus the dollar, reaching a record high of Rs284.85 in morning trade, according to information provided by the Exchange Companies Association of Pakistan (Ecap).

Experts blamed the government’s standoff with the International Monetary Fund for the record loss, which is 7.04 percent (IMF).

According to SBP statistics, the PKR closed Wednesday at Rs266.11 per USD.

Interbank closing #ExchangeRate for todayhttps://t.co/yixJmUnrgF pic.twitter.com/PWg8EoDAgM
— SBP (@StateBank_Pak) March 1, 2023

“Uncertainty resulting from IMF financing delay”
According to Mohammed Sohail, chief executive of Topline Securities, who spoke to Dawn.com, the recent decline was mostly brought on by a lack of confidence in the currency market due to the IMF’s delayed financing.

The “crackdowns on currency merely reinforced the grey market”
According to Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan (ECAP), Pakistan was urged by the IMF to exchange dollars at the going rate for commerce with Afghanistan.

In other words, they had stated that rather than the interbank rate or the open market, our true rate should be the grey market rate. They are correct since the only location where trading in dollars now occurs is on the black market, he continued.

He claimed that because of limitations put in place by the government on foreign exchange, trading moved to the black market.

The numerous limitations they have placed on foreign exchange businesses regarding the buying and selling of the dollar, he claimed, prevent the currency from rising or falling.

He said that despite government crackdowns [on the grey market], this is still the case. Asserting that carrying out crackdowns would not assist, Paracha urged for a revision of the policies.

“Unintentionally, our policies have substantially aided the grey market. The IMF is aware of this as well, and has advised us to get our exchange rate between the rupee and the dollar to that level,” he continued.

The currency has been plunging in recent days amid delays in an agreement between Pakistan and the International Monetary Fund, which they have been discussing since early last month.

One of the things the IMF wants Pakistan to do is switch to a market-based currency exchange rate system. If the IMF’s board approves this measure, a financing tranche of over $1 billion that has been held up since late last year over a policy framework will be released.

The lender’s requirements are designed to make sure Pakistan reduces its fiscal deficit before presenting its annual budget in June.

But, the budgetary changes required by any agreement are expected to increase the already record-high inflation rate, which reached 31.5 percent in February.

The IMF has also asked Pakistan to increase policy rates and fulfil bilateral and multilateral external funding obligations.

China, Pakistan’s longtime friend, is the only nation to have refinanced $700 million to Islamabad.

At an off-cycle meeting on Thursday, the Pakistani central bank is generally anticipated to increase its benchmark policy rate by 200 basis points, according to a Reuters poll.

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Pakistan Cut The Army’s Budget By RS72 Billion In Order To Finalize IMF Agreement

July 6, 2022 / By Zunair Tahir / Pakistan News

In order to satisfy a key requirement of the International Monetary Fund (IMF) concerning establishing primary budget surplus in the next fiscal year, Pakistan has reduced the armed forces development plan by Rs72 billion or one-fifth of the amount provided on June 10.

One of the key requirements of the IMF for the resumption of the bailout package is having a primary budget surplus of Rs153 billion, or 0.2 percent of the national GDP. Now, Finance Minister Miftah Ismail is hoping to get an agreement on the personnel level by the end of this week.

Negotiations Between IMF and Pakistan, On What Terms Agreed?

June 22, 2022 / By Zunair Tahir / Pakistan News

Ongoing talks between Pakistan and the IMF to revive the loan program have come close to success. According to Finance Ministry officials, the government has promised to impose 2.5 per cent income tax on those earning Rs 6 to 12 lakh per annum and gradually levy Rs 50 per liter on petroleum products.

According to Finance Ministry officials, the public has been assured of a gradual levy of Rs 50 per liter on petroleum products from July 1. In the first phase Rs 10 per liter and after that Rs 5 per liter will be charged. A total of Rs 750 billion has been targeted to be collected in levies next year.

Apart from this, Pakistan will also collect 1 to 4% income support levy from individuals and companies earning Rs. 150 million to 300 million per annum, while those earning Rs. Has been warned.

The US Dollar Set A New Record

Under the agreement, Pakistan was to increase the tax collection from the salaried class by Rs 125 billion but in the budget the government gave relief of Rs 47 billion instead of increasing the tax which was objected to by the IMF. The government’s move has resulted in a loss of Rs 47 billion in revenue, which has stalled talks with the IMF.

Now the government has once again come out in support of changing the tax slab and those earning Rs 6 lakh to 12 lakh per annum will be taxed at 2.5 per cent instead of Rs 100 which will be approved by the National Assembly through the Finance Bill.

The IMF demanded that the subsidies on oil and electricity be abolished, which was gradually abolished by the current coalition government, after which the IMF’s demand for petroleum levy was accepted and the levy was gradually implemented. Will As a result, prices of petroleum products are likely to rise further from July 1.

According to officials, the total volume of the budget is being increased from Rs 9,500 billion to Rs 9,900 billion at the request of the IMF. The FBR’s annual tax target has been increased by Rs. 436 billion. The FBR will now collect Rs 7440 billion instead of Rs 7004 billion.

Esther Perez Ruiz, the IMF’s representative in Pakistan, said that significant progress had been made in negotiations with Pakistani officials regarding the 2022-23 budget. Talks are underway between IMF staff and Pakistani officials aimed at strengthening macroeconomic stability in the new fiscal year.

According to Finance Ministry officials, an agreement at the staff level will be reached in the next few days as soon as the draft Memorandum of Economic and Financial Policy is received from the IMF. After which the IMF executive board will approve the next tranche of one billion dollars.

Pakistan has already received 3 3 billion out of the 6 6 billion loan program. The loan program has been stalled since March this year.

In this regard, Minister of State for Finance Dr. Ayesha Ghous Pasha said that the previous government had reached an agreement with the IMF on all the demands including personal income tax reforms and we have tried to complete the same incomplete work. We tried to give relief but we are bound by the agreement so we have to accept the condition of IMF.

According to him, the previous government was also in favor of raising petroleum levy and electricity prices. We are not doing anything that is not included in the agreement of the previous government with the IMF, because without it the fire.

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(IMF) Has Expressed Concern Over Pakistan’s Growing Inflation and Expanding Current Account Deficit

April 20, 2022 / By Zunair Tahir / Business News

ISLAMABAD, Pakistan – Pakistan’s surging inflation and expanding current account deficit have alarmed the International Monetary Fund (IMF).

According to a recent assessment by the Washington-based banking organization, the South Asian country’s productivity is on the decline.

Inflation is expected to stay around 11.2 percent this year, with the current account deficit hovering at 3.5 percent of GDP.

According to the estimate, economic growth will be about 4% this year, while unemployment will be around 7% this year and 6.7 percent next year.

On April 21, Pakistani Internet Users Will Experience Slow Speeds

Meanwhile, in the aftermath of the crisis in Ukraine, the UN has cut its global growth estimates, warning that a Kremlin invasion may break the global economy into opposing blocs.

It noted that prospects had deteriorated in the previous three months, as it decreased its growth forecast for 2022 from 4.4 percent to 3.6 percent. The news comes as Islamabad has formally begun discussions with the IMF on the bailout package in Washington. According to sources, negotiations with the US-based financial institution will last until April 24, and the IMF will disburse a $1 billion tranche following successful talks.

Governor of the State Bank of Pakistan, Reza Baqar, is now in the United States for discussions with IMF officials. He will also be present at the World Bank’s steering committee meeting. Miftah Ismail, the Prime Minister’s Finance Adviser, will participate in the IMF negotiations electronically.

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IMF Agreement Is Not A “Magic Cure,” Claims Shehbaz

IMF Agreement Is Not A “Magic Cure,” Claims Shehbaz

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Dar Again Eliminates The Option Of A Default

Dar Again Eliminates The Option Of A Default

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PM Says That All Conditions Have Been Fulfilled, But IMF Wants “More Guarantees”

PM Says That All Conditions Have Been Fulfilled, But IMF Wants “More Guarantees”

READ MORE NEWS…

Interbank Rupee Declines By Almost Rs19 versus The Dollar Due To IMF Delays

Interbank Rupee Declines By Almost Rs19 versus The Dollar Due To IMF Delays

READ MORE NEWS…

Pakistan Cut The Army’s Budget By RS72 Billion In Order To Finalize IMF Agreement

Pakistan Cut The Army’s Budget By RS72 Billion In Order To Finalize IMF Agreement

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Negotiations Between IMF and Pakistan, On What Terms Agreed?

Negotiations Between IMF and Pakistan, On What Terms Agreed?

READ MORE

The US Dollar Set A New Record

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(IMF) Has Expressed Concern Over Pakistan’s Growing Inflation and Expanding Current Account Deficit

(IMF) Has Expressed Concern Over Pakistan’s Growing Inflation and Expanding Current Account Deficit

READ MORE

On April 21, Pakistani Internet Users Will Experience Slow Speeds

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