Engineer Khurram Dastgir, the federal minister for power, provided an update on the talks between the government and the International Monetary Fund. He stated that both parties had agreed on every point, and Pakistan is nearing a deal with the IMF
Pakistan, which has a $350 billion economy, is seeking to the IMF for a crucial infusion of $1.1 billion to prevent defaulting. A larger shortfall, estimated by the Fund to be roughly Rs900 billion, or 1% of the GDP, represents a serious obstacle to securing a staff-level agreement.
The IMF delegation has been in Islamabad for a few days to hold discussions with Pakistani officials. Today’s negotiations will begin at the policy level once Pakistan and the Nathan Porter-led IMF negotiation team have finished their technical discussions (Tuesday). The lender has put Pakistan under severe guidelines in a number of areas.
On Monday, the minister claimed on the show “Capital Talk” that the IMF delegation had not insisted that the country cut its defense spending. To stop further losses, “they [the IMF] wanted the energy division.”
He continued by saying that the IMF has also urged the nation to reduce energy line losses in the country’s northern, southern, and western regions.
The minister went on to say that the international lender had made it clear to Pakistan that in the midst of the current economic upheaval, the nation would have to get its house in right. He stated that Pakistan would need to increase tax revenues while decreasing losses.
Since the US departed from Afghanistan, according to Dastgir, the international powers have not been willing to be lenient with Pakistan.
For a time, things will be tight: Miftah
Miftah Ismail, a former finance minister, had stated on Sunday that Pakistan will be in a difficult situation for a while, but had a chance to survive.
In response to a query from The News during a question-and-answer session on Twitter, Ismail had stated, “Things will be tight for a while, but we can get enough loans for now so we will get some room.”
Miftah had remarked that Pakistan had lost credibility in the eyes of foreign actors, which was “extremely costly” in response to another question on the economic harm caused by the delay in the resumption of the bailout program.
Stunning financial framework hole
According to the estimate of the Fund, Pakistan had a primary deficit gap of 0.9% of GDP, or Rs800–850 billion, primarily as a result of lower tax and non-tax receipts and higher expenditures.
However, the Pakistani side rejected the idea of such a fiscal shortfall and claimed that it will be between 400 and 450 billion rupees ($0.5 to $0.6% of GDP) for the current fiscal year.
The Washington-based lender estimated that the Federal Board of Revenue of Pakistan (FBR) may fall short of the anticipated tax collection target of Rs7,470 billion by as much as Rs130 billion.
The discounted power rate for export-oriented industries and its link to export revenues may be abolished with the support of the IMF.
It is incorrect to receive subsidies on the entire production of gas and electricity for the textile industry, which sells 40% of the products it produces on the domestic market.
During the technical level discussions, there are still disagreements on determining the precise budget deficit between Pakistan and the visiting IMF review mission. The government and the IMF will set the new taxation measures after reaching an agreement. This agreement will be announced in a future mini-budget. On Monday, technical level discussions will continue as they could not agree on the amount of the budget gap. Policy-level talks are expected to begin on Tuesday, based on information shared by sources who talked to some media in private on Saturday.