Dar says no new taxes for getting loan as IMF agrees to give loan
02 July, 2013
Expecting a 'breakthrough' in the ongoing talks with the visiting IMF mission for securing a fresh bailout package, Finance Minister Ishaq Dar said on Monday that Pakistan was not seeking any charity but being a member of the World Bank and International Monetary Fund (IMF) negotiating a loan package.
The minister said that the government would not impose any new taxes. However, the electricity tariff might go up as the regulator possessed autonomy. The minister was of the view that the government did not allow Rs6 hike per unit in electricity tariff although the media had increased the tariff twice.
"We are not asking for any grant or charity but negotiating a loan package on the basis of our terms and conditions. The ongoing talks are moving in the right direction and the Fund mission may extend their stay in Islamabad till Thursday or Friday," Dar told reporters outside the Q Block (Finance Ministry) after holding policy level talks with the IMF at midnight on Monday.
However, the sources said that Pakistan and IMF are negotiating the Memorandum of Economic and Financial Policies (MEFP) for obtaining $5.4 billion loan package to repay the IMF's outstanding loans and avoid default. "There are four to five prior actions including raising the electricity tariff, reducing tariff differential subsidy, increasing discount rates and purchasing dollars to boost the dwindling foreign currency reserves," said the official sources.
The minister said that in case of having the IMF programme or no programme, there would be no danger of any crisis. "I have my own plans if we do not agree on the new loan programme," he said.
However, he said that in the wake of immediate loan repayments, there was no other option but to seek a fresh loan package but it would not be done on the basis of anyone's dictations. "We will not impose new taxes," he stated.
The minister said that he had managed Pakistan's economy when the foreign currency reserves had touched the lowest ebb i.e. $414 million. Despite meeting obligations, the foreign currency reserves had touched $2.398 billion when the PML-N left the government in 1999.
He said that he did not want to plunge into the debate of blame game as the previous government had obtained loans from the IMF but they did not utilise these loans prudently, so again the responsibility was on their shoulders to pay back the loans.
The IMF is still insisting upon getting approval of the federal cabinet on the fresh loan package or duly co-signing of PM on the Letter of Intent (LoI). But Finance Minister Ishaq Dar, when inquired whether the IMF demanded approval of the federal cabinet on the fresh loan package, said that it was never done in the past, so why it would be done this time.
According to sources, both sides were discussing almost 300 percent quota of the country for finalising the exact size of the fresh bailout package that would translate into almost $5.4 billion under the Extended Financing Facility.
When inquired about the exact size of the next program, the finance minister said that the talks had not yet reached the stage where the size of loan could be decided. "We are still finalising the modalities and details of the next package," he added.
Earlier, International Monetary Fund's clutches have expanded further as the Fund agreed to pay $5 billion loan to Pakistan, media reported on Monday.
The loan agreement on fresh loan was reached after two days of talks in Islamabad. Ministry of Finance has also confirmed the breakthrough.
During talks, the government officials addressed IMF's reservations over energy sectors and taxation side.
The authorities assured IMF that tax collection target has been set at Rs. 2475 billion during the new fiscal year through expansion in the tax net, whereas, subsidy will be reduced step by step.
IMF was also told that remittance of power tariff and line losses will also be brought down.
The Fund's mission will stay in Pakistan till Tuesday.