More time needed to finalize IMF deal

More time needed to finalize IMF deal

The visit of an IMF mission to Islamabad for finalising a bailout package for Pakistan may be delayed as both sides are still engaged in an intense discussion on the proposed programme, official sources told Dawn.

Finance Minister Asad Umar said earlier this month that the mission would visit Islamabad soon after the spring meetings of the World Bank Group, which includes the International Monetary Fund (IMF), and an agreement should be signed by the end of this month. The meetings, held in Washington this week, ended on Sunday.

The finance minister, who led the Pakistani delegation at the meetings, went to New York on Friday but his team, which includes senior officials of his ministry and other government agencies, stayed in Washington for further talks.

At a Thursday night news briefing in Washington, Mr Umar said the two sides had “more or less, reached an understanding” on the bailout package and “in a day or two, we hope to reach a full agreement”.

Fund officials seeking details of CPEC

But it seems that “both sides are still engaged in an intense conversation on the final details of that full agreement,” an official source told Dawn. “So, the IMF mission is now more likely to visit Islamabad in May, not April.”

Another official familiar with the Pakistan-IMF talks said, “Islamabad still hopes to conclude the agreement before June, as they believe the bailout package would help budget prospects.”

The sources said that IMF officials were also seeking details of the China-Pakistan Economic Corridor (CPEC), along with a written guarantee from both Pakistan and China that the IMF assistance will not be used to repay loans to China.

The finance minister is likely to visit China on April 25 for talks on the IMF concerns over CPEC and IMF will wait to hear from him before it finalises the bailout package, the sources said.

Meanwhile, both sides are engaged in “fine-tuning” the details of the proposed IMF programme. Pakistan wants the IMF to review some of the conditions it has attached to the package while the IMF insists that those conditions are absolutely essential for a successful completion of the programme.

Pakistanis point out that this would be their 14th package with the IMF, if finalised. They argue that the conditions attached to previous programmes were also not fully implemented because they were too restrictive. Pakistan wants the IMF to focus on long-term structural reforms that help revive its economy instead of attaching conditions that would be difficult to implement.

During negotiations on the new package, the Pakistani delegation told the IMF that they “do not want to commit to what we cannot implement”.

When asked how much money did Pakistan expect from the IMF, a source said: “The amount and length of the programme also depends on the nature of the package. If the conditions are too restrictive, Pakistan would expect a larger package, i.e. more assistance for a longer period.”

Some of the conditions proposed by the IMF include: making the State Bank independent, a market-oriented exchange rate, expanding the tax target by Rs5,000 billion, ending income tax concessions, more taxes on salaries, narrowing the amount of taxable income from Rs12 lakh a year to Rs4 lakh, reducing electricity and gas losses, no government interference in Nepra and Ogra policies, Rs140 billion electricity and gas revenue losses be recovered from consumers.

The sticking points, however, are the demands for market-determined exchange rates and sharing details of Chinese loans which Pakistan is reluctant to do so.

The IMF insists on full disclosure of all financial cooperation between Pakistan and China, including assistance related to infrastructure development, nuclear power plants, joint manufacturing of JF-17 Thunder fighter jets and procurement of submarines.

The IMF is also demanding details of more than $6.5bn of commercial loans Pakistan has received from China in the past two and a half years.

In July, China also deposited $2bn with the State Bank of Pakistan.

Dawn

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