The International Monetary Fund (IMF) is in the early stages of formulating a policy document for a potential new bailout program for Pakistan, sources told ProPakistani.
This comes after IMF’s technical team led by Marijn Verhoeven recently concluded a successful second round of negotiations with Pakistani authorities following the lender’s visit to the country.
During their visit, the IMF team engaged in extensive discussions with officials from the Ministry of Finance and the Ministry of Commerce. Finance Ministry sources said the IMF had previously crafted a policy paper in 2019, proposing conditions for a loan program with Pakistan.
These conditions included raising the federal excise duty for the tobacco sector, increasing beverage taxes, raising personal income tax rates, eliminating useless GST exemptions, and imposing Petroleum Development Levy (PDL) on petroleum products. Pakistan had accepted the IMF’s loan program based on these conditions.
However, the current discussions are different from the current standby arrangement between Pakistan and the IMF. The technical team is reevaluating the 2019 policy document in light of the current economic situation in Pakistan. The lender’s aim is to devise a new set of measures that align with Pakistan’s present-day needs and challenges.
Sources from the Ministry of Finance emphasized that the discussions are geared towards generating a comprehensive report outlining crucial reforms. Given the substantial changes in Pakistan’s economic landscape since 2019, the objective is to provide a roadmap for economic development in the context of the current scenario, sources added.
Sources banked on the expectation that the recommendations arising from these discussions will play a crucial role in shaping the economic policies of the incoming government post-election. The IMF, it seems, is proactively working on a new loan program to address Pakistan’s evolving economic requirements.
During Tuesday’s talks, the IMF team extended its discussions beyond the Ministry of Commerce to the Ministry of Finance. Simultaneously, a task force established by the caretaker finance minister, Shamshad Akhtar, convened a two-and-a-half-hour meeting. The task force, focused on recommending reforms for economic recovery, briefed the IMF team on its findings.
Sources added that the IMF is urging an increase in funds allocated to the Benazir Income Support Program to assist the underprivileged. Additionally, environmental concerns were a key focus, with the IMF emphasizing the need for measures addressing climate change and environmental pollution.