Federal Minister for Power Engineer Khurram Dastgir has shared an update on the talks between the government and International Monetary Fund, saying that Pakistan was on the verge of striking a deal with the lender as both parties had reached a consensus on all issues.
With an economy of $350 billion, Pakistan is looking to the IMF for a key instalment of $1.1 billion to avoid defaulting. The Fund has identified a bigger gap of around Rs900 billion, or 1% of the gross domestic product (GDP), which represents a significant barrier to reaching a staff-level agreement.
The IMF team has been in Islamabad for the last few days for talks with the Pakistani authorities. Following technical-level negotiations between Pakistan and the IMF’s negotiation team led by Nathan Porter, the two sides will start policy-level negotiations today (Tuesday). The lender has imposed strict conditions on Pakistan in various fields.
The minister, while speaking on Geo News programme ‘Capital Talk‘ on Monday, said that the IMF team had not demanded the government to slash its defence budget. “Instead, they [the IMF) sought the energy division to make its losses peter out.”
The IMF had also called upon the country to cut down line losses of electricity in the country’s northern, southern and western areas, he added.
The minister further stated that the international lender had made it clear to Pakistan that the country would have to set its house in order amid the prevalent economic turmoil. He said Pakistan would have to enhance its tax revenues and reduce losses.
Dastgir said the international powers were not willing to show Pakistan lenience since the US withdrew from Afghanistan.
Things to remain tight for a while: Miftah
On Sunday, former finance minister Miftah Ismail had said that Pakistan would remain in a tight spot for some time but had a chance to still survive.
“Things will be tight for a while but we can get enough loans for now that we will get some room,” Ismail had said, while replying to a question asked by The News during a question and answer session on Twitter.
Replying to another question regarding the economic damage caused due to the delay in the resumption of the bailout programme, Miftah had said that Pakistan had lost credibility in the eyes of international players, which was “very costly”.
Yawning gap in fiscal framework
As per the Fund’s assessment, Pakistan faced a primary deficit gap of 0.9% of the GDP, which is equivalent to Rs800-850 billion, mainly because of less tax and non-tax revenues and increased expenditures.
However, the Pakistani side did not accept such a fiscal gap, arguing that it was estimated to the tune of 0.5 to 0.6% of GDP in the range of Rs400 to Rs450 billion for the current fiscal year.
The Washington-based lender assessed that the Federal Board of Revenue of Pakistan (FBR) might face a shortfall of Rs130 billion in achieving the desired tax collection target of Rs7,470 billion.
The government and the IMF might agree to abolish the reduced electricity tariff for the export-oriented sector and link it with export proceeds.
The textile sector is selling 40% of its produced items in the domestic market, so it is wrong to get subsidies on power and gas tariffs on the whole production.
“Differences still persist over ascertaining the exact fiscal gap between Pakistan and the visiting IMF review mission during the technical levels talks. Once it’s finalised with the IMF, then the additional taxation measures will be firmed up, which will be unveiled through the upcoming mini-budget. In view of a lack of reconciliation over the figure of fiscal gap, the technical level talks will continue on Monday and then policy level talks are expected to commence from Tuesday,” sources confirmed while talking to a select group of reporters in the background discussions on Saturday.