Doha talks with the IMF promise to be uphill after the move, prompted by the consideration of inflation
By Staff Reporter
ISLAMABAD: Prime Minister Shehbaz Sharif has once again declined to authorise any immediate increase in petroleum prices, throwing a spanner in the works of the government team tasked with negotiating a revival of the stalled USD 6-billion bailout with the International Monetary Fund (IMF).
Withdrawal of an unfunded subsidy on pump prices that has broken Pakistan’s budget for years was a reform measures agreed by the administration of ousted Prime Minister Imran Khan.
The former government, however, balked at implementing the measure in view of its potential to unleash a flood of inflation and fuel public anger, leading to the suspension of the Extended Fund Facility (EFF) program.
PM Sharif seems to be following the same path.
Addressing a news conference Sunday, Federal Minister for Finance Miftah Ismail said that PM Shehbaz Sharif had barred any immediate increase in POL prices, but the economic team was headed to Doha to kick-start parleys with the IMF next week and they will attempt to convince the Fund staff to restore the stalled program.
The Finance Minister lamented that Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) government had agreed with the IMF to recover PKR 30 billion as a petroleum levy and impose a 17 percent GST on POL products, but then laid down landmines by providing an unfunded subsidy.
Ismail nevertheless voiced optimism that his team would be able to find out amicable solution in upcoming parleys with the IMF.
He said that the government would have to adjust the prices ultimately but for time being the POL prices would not be increased. His team will try to convince the Fund staff that the measures could be pushed through at a more opportune time later on, he said.
Regarding Saudi package, he said Pakistan requested three things including a rollover of the existing USD 3-billion deposit with the State Bank of Pakistan (SBP), doubling of an oil financing facility, and additional deposits.
He maintained the KSA had agreed to grant the rollover for one year, which would be done in coming December 2022.
The Kingdom also agreed to double the oil financing facility either through OPEC Fund, EXIM Bank, or IDB. The matter of additional deposits, however, was under discussion, but Miftah Ismail said he could not disclose the precise measures under discussion.
Earlier reports have said the Saudi assistance is predicated on the revival of the IMF programme.
With regards to a similar arrangement with the UAE, he said that discussions were underway but it will be some time before modalities are finalised.
The Finance Minister lamented that Imran Khan’s government had increased public debt by PKR 20 trillion in its 40 months rule but had built nothing.
He said that the wheat and fertilisers had been smuggled out with active connivance of some PTI leaders and the country was going to pay a heavy price for each of these missteps. It was because of such policies that the country’s import bill had surged to USD 75 billion while exports languished at USD 30 billion, resulting in a trade deficit of around USD 45 billion.
He said that primary deficit for the current was envisaged at PKR 25 billion but in practice it was projected to go up to PKR 1320 billion. All these were major breaches of the commitment with the IMF, and there was no way the government could paper over these to continue the relationship with the Fund.
He reiterated his government’s stance that forex reserves held by the SBP stood at a puny USD 10.4 billion when PTI-led government left.
To another question, he said that he was not leaving and would continue as Finance Minister as long as the PM showed his trust and confidence in him.
[ENDS]
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