Finance Minister Ishaq Dar has confirmed that Pakistan had received a Memorandum of Economic and Fiscal Policies (MEFP) along with a Letter of Intent from the International Monetary Fund (IMF). He also announced Rs. 170 billion in additional taxes to complete the lender’s program and receive over $1.1 billion in the bailout.
Addressing the media earlier today, Dar disclosed brief details of the Rs. 170 billion in fiscal taxes and energy sector reforms and said the government was focusing on minimizing untargeted subsidies with huge taxes on priority.
Dar said the 10-day-long discussions covered the power and gas sectors, as well as the fiscal and monetary aspects. “The SBP governor and officials from various departments and ministries were present,” he said, adding that Prime Minister Shehbaz Sharif himself assured the IMF that the government would implement all conditions.
Priority Sectors Hit With More Taxes
As per details, the government will levy a Rs. 10 per liter fuel surcharge on diesel next month. Dar said the IMF’s demand of imposing GST on petrol “was not accepted”.
The cost of electricity, which is currently estimated to be Rs. 300 billion while only receiving Rs. 1,800 billion, is one of the most pressing issues confronting the economy. Dar stated that strict energy sector reforms will be put in place in order to prevent the growth of circular debt in the power and gas sectors and reinstate the IMF loan facility.
Forex Reserves and Bilateral Support
Dar said all prior commitments will be fulfilled and Pakistan will get a fresh influx of foreign inflows from both bilateral and multilateral countries, which will help improve its forex reserves position. “Friendly countries will also keep their promises”, he added.
Dar mentioned that the first round of virtual talks post-MEFP will be held on Monday. He also clarified that it will take a few days to complete Staff Level Agreement as it requires a few protocols to be followed.
The IMF team said it welcomes the Prime Minister’s commitment to implement policies needed to safeguard macroeconomic stability and thanks the authorities for the constructive discussions.
The lender stressed on the timely and decisive implementation of these policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development.