Revival Of $6bn EFF: Miftah Explains What IMF Actually Wants From New Government

ISLAMABAD: Finance Minister Miftah Ismail Wednesday said that the International Monetary Fund (IMF) has sought completion of five actions for revival of $6 billion Extended Fund Facility (EFF) from the new government.

Ismail during a briefing to a select group of media persons ahead of leaving for Washington along with State Minister for Finance, Aisha Ghaus Pasha, Secretary Finance and others, said that he would be holding talks with the Fund on 7th review during his visit and a meeting with the IMF MD is also expected besides meetings with high-ups of G7 countries, World Bank executive director and meetings with the finance ministers of Turkey and Saudi Arabia.

He said that his priority would be to ensure release of the $ 1-billion tranche of the Fund programme. The governor State Bank of Pakistan (SBP) is already in Washington for talks with the IMF officials.

He criticised the previous government for taking economically ‘unwise’ decisions and worst one was not to pass on the petroleum prices to the consumers and consequently, the present government had to approve Rs67 billion supplementary grant from the ECC for April and as per Ogra, Rs68 billion each month subsidy for the next two months – May and June – would be required.

Ismail said that rich are being subsidised by the poor and the poor are getting petrol at the same cost as those who owned Rs30 million vehicles.

He also disclosed that the IMF has sought increase in the prices of petroleum products as well as taxes on levy, withdrawal of industrial amnesty scheme, reducing circular debt, increasing electricity tariffs, and fiscal saving from the present government for revival of the EFF programme.

The finance minister said that his top-most priority is to revive the IMF programme for balance of payments support but added that he did not accept the Fund demand and would negotiate with them during his visit to Washington.

However, he said that the tax amnesty scheme for the industrial sector may have to be done away with and an increase in petroleum prices is inevitable as the economy cannot sustain this burden.

Ismail said that if these conditions are met, the programme will be revived but stated that all the demands cannot be implemented immediately rather these would be implemented gradually. About the IMF demand to impose taxes, he said that Fund will be informed that with two months left in the current financial year, imposing taxes would not be possible. He said that in his opinion, increase in tax rate was not the solution to the problem as it would increase revenue. He said that personally he was not supportive of increase in tax rates.

The minister said that he was against giving amnesty scheme, so it may have to be rolled back and any decision regarding petroleum prices would be taken by the prime minister. He said that as far as fiscal saving was concern, Rs100 billion from the PSDP would be slashed because there is sufficient space besides belt-tightening would also be done to bring the budget discipline back on track.

He said that for the poor the price of ghee has been reduced by Rs205 per kg at the USC, flour and sugar would also be available for less cost and the government would provide required subsidy to the USC in this regard.

Ismail said there would be no reduction in the Benazir Income Support Program budget.

He said that he was expecting roll over from China US$ 2.4 billion in debt and safe deposit of US$ 2 billion. To repay by July, we will need US$ 4 billion in debt from April to June 2022, which will improve the current account deficit. He said that previous government has taken added around $27 billion in external debt, an average of $9 billion per year, whereas, average of taking debt was just $1 billion during his party’s government till 2018.

He said the budget deficit during the five years of his party’s government up to 2018 was Rs1,600 billion; however, during the current year, it has been recorded at Rs5,600 billion.

The finance minister said the tax collection has also been reduced from 11.1 per cent of the GDP to 9.1 per cent, whereas, the debt, increased from Rs24, 952.9 billion to Rs42, 735 billion by December 2021.

He said that he was shocked to learn that energy sector circular debt pending has increased to Rs1.5 trillion.