Has Pakistan complied with all prior actions of the IMF?

The board demands yet another interest rate hike, as per reports.

ISLAMABAD: Finance Minister Ishaq Dar has once again claimed that Pakistan has complied with all the prior actions for the 9th review with the IMF.

The Finance Minister on Thursday mentioned in his article that  Pakistan has already carried out all the required reforms for the 9th review with the IMF. These reforms include measures to broaden the low tax base by ending tax exemptions, raising the electricity and gas prices to pass on the burden to the consumers and minimizing the subsidy component while protecting low-income groups.

Ishaq Dar mentioned in his article that the government has accomplished significant structural reforms in the energy sector during the last 3-4 months.

All untargeted subsidies in the power and gas sector have been withdrawn with the aim of recovering the full cost of generation through tariff revision.

In addition, the government has moved towards targeted subsidies so that the poor and vulnerable are cushioned from the effects of inflation and rising prices while the burden falls on the affluent class.

Moreover, the government has increased the stipend for the poorest of the poor by 25 per cent under the Kafalat Programme under BISP with effect from January 1, 2023 — increasing the BISP budget by Rs40 billion to Rs400 billion.

The government is also taking all possible measures to correct the twin deficits, including policy and administrative measures.

As a result, the Current Account Deficit (CAD) narrowed to only $3.4 billion during the first nine months of the current fiscal year to March 31, 2023, as against $13.0 billion in the corresponding period last year.

It is expected to close the CAD around $4.5 billion in the current fiscal year ending June 30, 2023. This will help improve the country’s forex reserves and reduce reliance on external borrowings.

Ishaq Dar said that the government has gradually withdrawn all tax exemptions as agreed with the IMF.

The government is mindful of the fact that these exemptions not only create distortions in the tax system but also lead to a shortfall in the revenue targets.

Third, net federal revenues have witnessed a growth of 32 per cent during the first eight months to February 28, 2023, of the current fiscal year against the same period of the last year.

He said that the current non-markup expenditures have been reduced by 19 per cent, mainly due to the withdrawal of subsidies and grants. The SBP has been independently taking its decisions for monetary policy tightening in order to curb inflation in the country.

He again claimed that the Staff Level Agreement (SLA) will be signed soon with the IMF which should be followed by the approval of the 9th review by the IMF Board.

However media reports suggest that the IMF is still not content with the progress made by Pakistan. As per reports, it is expected off of Pakistan to increase the interest rate further to target its inflation. The headline inflation for last month crossed 36%, making situations worse for a common citizen.


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