- Finance Minister Mr Ishaq Dar receives IMF mission chief Nathen Porter.
- The IMF’s review mission had arrived in Islamabad a day earlier.
- Pakistan expected to share its plan for additional taxation measures.
ISLAMABAD: Talks between Pakistan and International Monetary Fund (IMF) kicked off on Tuesday to strike a staff-level agreement on the ninth review under the $7 billion Extended Fund Facility (EFF). Finance Minister Ishaq Dar is leading the Pakistani side while IMF’s review mission is headed by Nathen Porter as the cash-strapped nation launches renewed efforts to complete the pending ninth review. The IMF’s review mission had arrived in Islamabad on Monday.
The government is expected to share its plan with the visiting review mission for taking additional taxation measures. Analysts have termed the technical level talks "toughest" as the Fund has refused to give any leniency in its conditions set for the revival of the loan facility. Pakistan is gripped by a major economic crisis, with the rupee plummeting, inflation soaring and energy in short supply. Prime Minister Shehbaz Sharif for months held out against the tax rises and subsidy slashing demanded by the IMF, fearful of backlash ahead of elections due in October. But in recent days, with the prospect of national bankruptcy looming and no friendly countries willing to offer less painful bailouts, Islamabad has started to bow to pressure.
The government loosened controls on the rupee to rein in a rampant black market in US dollars, a step that caused the currency to plunge to a record low. Artificially cheap petrol prices have also been hiked. "We're at the end of the road. The government has to make the political case to the public for meeting these (IMF) demands," former World Bank economist Abid Hasan told AFP. "If they don't, the country will certainly default and we'll end up like Sri Lanka, which will be even worse." Sri Lanka defaulted on its debt last year and endured months of food and fuel shortages that sparked protests, ultimately forcing the country´s leader to flee overseas and resign. IMF pushing govt to fill Rs600bn gap on fiscal front: The Washington-based lender is suggesting the toughest prescriptions on all fronts of the economy at a time when the foreign exchange reserves are persistently on the decline and touched the lowest ebb of $3.6 billion.
Although, the government had already implemented two major conditions including allowing adjustment of the rupee against the dollar and hiking record levels of a surge in petroleum prices ahead of the talks. The IMF is asking the government to fill the yawning gap of Rs600 billion on the fiscal front through additional taxation measures or cutting down on expenditures in order to restrict the budget deficit and primary deficit within the desired limits. Differences persisted over the exact fiscal gap and both sides will hold parleys to evolve consensus over the exact estimates for taking additional taxation measures through the upcoming mini-budget. Pakistan and the IMF will hold technical-level talks from today to Friday and then the policy-level talks will commence finalising the Memorandum of Financial and Economic Policies (MEFP) document. The IMF further demanded an increase in electricity tariff within the range of Rs12.50 per unit as Islamabad seemed to agree to hike the electricity tariff of Rs7.50 per unit in a staggered manner.
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