Pakistan and IMF close in on Loan Agreement worth $7-8 bn as staff-level talks conclude
Pakistan and IMF have been negotiating a loan agreement for the developing country for the past few months. However, nothing substantial had happened previously.
Now, the Pakistan Tehreek-e-Insaf (PTI) government and the International Monetary Fund (IMF) are likely to announce a staff-level agreement on Friday (today). Pakistan has accepted most of the global lender’s demands.
On Thursday, Pakistan and the IMF finalized the issues of the fiscal deficit and primary balance.
“Pakistan already owes $5.8 billion to the IMF on account of previous loans.”
It is expected that the loan size will be equal to about 225% of Pakistan’s quota or $6.5 billion. The country already owes $5.8 billion to the IMF on account of previous loans.
On Wednesday, Pakistan and IMF worked out a financing gap of around $11 billion for the next fiscal year, 2019-20.
Moreover, the government will start withdrawing exemptions offered in various taxes amounting to around Rs 350 billion in the budget for 2019-20.
“The two sides also agreed that Pakistan will increase costs of electricity and gas for the consumers in the next budget.”
As usual, this package will ensure that the common Pakistani faces the full wrath of the rising prices. Once again, the electricity and gas prices will be increased. Pakistan braces itself for even more inflation.
Additionally, the power sector regulator, NEPRA will be given complete autonomy.
“Projections for the next fiscal year’s financing gap are at $10-$11 billion.”
Projections for the next fiscal year’s financing gap are at $10-$11 billion. The demand of the IMF for an increase in the policy rate by 100-200 basis points has also been agreed upon. Various measures aimed to build up foreign exchange reserves too have been agreed upon.
The official added that the IMF team pitched the GDP growth and current account deficit (CAD) on the lower side during the negotiations. However, they agreed upon a middle path.
Pakistan and the IMF will start the budget-making talks after the current deal has been finalized.
Update: Since the publishing of this article, Pakistan and the IMF have reached an agreement amid concerns shown by the citizen over rising prices. You can read all about it over here