Though Pakistan has received the ‘Memorandum of Economic and Financial Policies’ draft from the International Monetary Fund, but there is still confusion over where matters stand between the government and the international lender.
The government is interpreting it as the ‘settlement’ of its differences with the Fund. Yet the IMF mission’s departure from the country without finalising the agreement indicates that large gaps still remain to be bridged.
This message has brought down negative trend in the PSX and the dollar rise as the investors lost hope of the immediate revival of the loan programme with the IMF.
The IMF’s carefully crafted, short concluding statement on the 10-day loan talks further underscores these gaps, despite the “considerable progress” on measures to remedy domestic and external imbalances.
That the IMF statement stresses the need for permanent revenue measures to strengthen Pakistan’s fiscal position implies that the lender isn’t satisfied with the government’s plan to boost revenues through temporary actions.
Finance Minister Ishaq Dar’s presser failed to give a clear picture of the position of the two sides on the issues under discussion.
What we know is that Islamabad has agreed to impose taxes of Rs170bn, reduce untargeted gas and energy subsidies, increase PDL on diesel by Rs10 to Rs50, raise allocations for BISP by Rs40bn and cap the gas sector’s circular debt at its current level.
With negotiations on the MEFP to continue virtually from Monday to discuss the measures needed before the final agreement is signed, it is hoped that the two sides will hammer out their differences in the next few days. The outcome of the virtual discussions will nevertheless depend on how wide apart the current positions are on the issues on the table.
We don’t know exactly what the final agreement with the IMF would entail for the people. However, it is clear that the measures that are needed to put the economy back on track would bring significant hardship to the common Pakistani, a price that can no longer be avoided or minimised, unfortunately.
