Amid a worsening economic crisis due to floods, high inflation and depreciating currency, Pakistan on Friday urged the International Monetary Fund (IMF) to ease harsh terms which require Islamabad to increase power tariffs and fuel taxes over the next six months.
The reminder was given by Finance Minister Muhammad Ishaq Dar during a virtual meeting with IMF Mission Chief Nathan Porter, reported The Express Tribune. During the first interaction, Porter asked the finance minister about the specifics of any proposal to seek debt rescheduling from the Paris Club to whom Pakistan owes USD 9.7 billion.
Sources said that the IMF mission chief did not give any commitment but said that the IMF was looking into the Pakistani request. Nathan Porter also asked about the specifics of Pakistan’s decision to seek debt rescheduling from the Paris Club, reported The Express Tribune.
The finance minister informed him that the government was working on the modalities and that any final decision would be taken in consultation with the IMF.
Pakistan owes USD 9.7 billion to the Paris Club, including USD 8 billion to five countries – Japan, Germany, France, the United States and South Korea. Out of this, USD 1.1 billion is maturing this year.
“The finance minister further reaffirmed the government’s commitment to undertake the reforms envisaged under the programme,” said the statement.
“The finance minister recalled the meeting of Prime Minister Shehbaz Sharif with the IMF managing director during his visit to the US in which the IMF MD vowed to support Pakistan in this difficult situation caused by the flash floods and reconsider the programme conditions,” said a statement issued by the finance ministry after the brief virtual meeting, reported The Express Tribune.
Pakistan’s PM urged the IMF head to provide upfront with the remaining loan of USD 3 billion and allow a pause in the increase in electricity prices and petroleum levy for four months.
The purpose of seeking the moratorium on implementing these conditions is to ease the inflationary pressures hurting every household, irrespective of the income level, reported The Express Tribune.
Notably, the IMF had put harsh conditions on Pakistan in return for the remaining loan of nearly USD 3 billion.
Under the agreement, Pakistan is required to increase the petroleum levy to Rs 50 per litre on all petroleum products. At present, it is charging a levy of Rs 37.50 per litre, which means that the tax has to be increased by Rs 13.50 per litre amid already high prices.
Similarly, the petroleum levy on high-speed diesel is currently Rs 7.58 per litre, which has to be increased by another Rs 42.42 gradually till March next year, reported The Express Tribune.
The Economic Coordination Committee (ECC) is also scheduled to meet today (Friday) to take up a summary to approve a 51 paisa per unit increase in electricity prices for K-Electric consumers for a period of three months.
It will be the first ECC meeting, headed by Ishaq Dar, who will also review a proposal to relax the ban on the purchase of computers for the growing size of the cabinet, reported The Express Tribune.
Meanwhile, the IMF mission chief also discussed the support of international lenders for the country to mitigate the effects of flash floods, reported The Express Tribune.
The statement said that the finance minister briefed the IMF official on the economic situation caused by the devastating floods that affected infrastructure, crops and people’s livelihood.
Initial estimates suggest that Pakistan might have sustained USD 28 billion in damages due to the floods while the poverty rate is feared to increase by another 7 per cent to 30 per cent.
Pakistan’s external sector position remains vulnerable despite the revival of the IMF programme a month ago.
The central bank said on Thursday that during the week ended September 23, 2022, the SBP’s forex reserves decreased from USD 341 million to slightly above USD 8 billion due to external debt repayment.
A new report of the IMF said that the global lender had augmented Pakistan’s programme size last month.