Pakistan, IMF nearing consensus on $5.4 bn bailout package
03 July, 2013
ISLAMABAD: Pakistan and IMF have almost evolved a consensus on a fresh bailout package for Islamabad in the range of $5.4 billion under medium term Extended Financing Facility (EFF) in order to avoid default on payment of external loans.
"We have almost reached on conclusion of our negotiations with the IMF and it is expected that a consensus will be announced today (Wednesday) soon after the final round of talks," a senior official privy to talks told on Tuesday night. Some apparent progress was achieved on two thorny issues including taxation and energy that helped breaking the deadlock between the two sides.
The IMF expressed its concern over massive revenue shortfall whereas the FBR failed to achieve its desired target by a massive margin of Rs439 billion.
The FBR had so far collected Rs1942 billion against initially envisaged target of Rs2381 billion which was revised downward four times and even then the final target of Rs2007 could not be achieved.
"How you will be able to increase FBR's revenue to the tune of Rs533 billion in current financial year as the FBR increased its collection only by Rs60 billion in last financial year 30," the IMF raised question.
Pakistan, however, has agreed to take administrative measures to bridge revenue shortfall including conducting audit and taking other steps for effective enforcement. "We will also abolish some tax exemptions as a committee will review all exemptions and come up with its recommendation to identify those which will be abolished through Statutory Regulatory Orders (SROs)," said the official.
"After evolving consensus on agreed conditions under Memorandum of Economic and Financial Policies (MEFP), Islamabad will now formally approach the Fund for securing fresh bailout package by signing Letter of Intent (LoI) to avert looming balance of payment crisis on account of heavy repayments of foreign loans," official sources said.
At the conclusion of talks on Tuesday night, Finance Minister Ishaq Dar refused to talk to the media saying that he could not talk on daily basis.
To secure fresh loan package of $5.4 billion from the IMF, the cash-starved Pakistan will have to raise electricity tariff in phased manner, erasing power differential subsidy, jacking up discount rate by 1.5 to 2 percent, purchasing dollars through open market operation as prior actions to get approval of Fund's executive board.
"The World Bank will do financing for complete restructuring of FBR in case of agreeing on fresh bailout package from the IMF," said the official sources.