IMF denies tying bailout to compromise on Pakistan’s nuclear capability
- IMF Pakistan chief issues statement on delay in agreement.
- Says Fund has not attached any strings as reported.
- Talks focused on balance of payment issues, says Esther Perez.
ISLAMABAD: The International Monetary Fund (IMF) has rubbished claims that the multilateral lender had attached any nuclear-programme-related strings to the revival of a bailout stalled for months despite weeks-long talks between the two sides.
The lender is yet to approve the release of $1.1 billion originally due to be disbursed in November last year, leaving Pakistan with only enough foreign exchange reserves to cover one month’s imports.
Pakistan has been hosting an IMF mission since early February to negotiate the terms of the deal, including the adoption of policy measures to manage its fiscal deficit ahead of the annual budget due around June.
The funds are part of a $6.5 billion bailout package the IMF approved in 2019, which analysts say is critical if Pakistan is to avoid defaulting on external debt obligations.
Veteran politicians Senator Raza Rabbani and former foreign minister Shah Mahmood Qureshi had raised concerns about whether the delay in the staff-level agreement with the Fund has anything to do with the country’s strategic assets including the nuclear and missile programmes.
They have asked the government to come clear on this issue.
In a statement released to the media on Sunday, IMF resident representative in Islamabad Esther Perez Ruiz denied attaching any strings to the External Fund Facility (EFF).
“Regarding recent speculation that programme discussions with the authorities for the ninth review under the IMF-supported programme may have covered Pakistan’s nuclear weapons programme, I want to be categoric that there is absolutely no truth to this or any insinuated link between the past or current IMF supported programme and decision by any Pakistani government over its nuclear programme,” the official said.
The IMF chief further said that the discussions have exclusively focused on economic policies to solve Pakistan’s economic and balance of payments problems, in line with the Fund’s mandate for promoting macroeconomic and financial stability.
‘No compromise on nuclear, missile programme’
On Thursday, Finance Minister Ishaq Dar promised that there would be no compromise on the country’s nuclear and missile programme.
The finance minister made the statement in the Senate in response to Senator Raza Rabbani’s questions about the delay in signing the agreement with the IMF.
Rabbani regretted that the upper House of the Parliament had “neither before nor today been taken into confidence on what are the conditionalities of the IMF” for extending the loan facility to Pakistan.
He had termed the delay “absolutely out of the ordinary, extraordinary” saying: “The question arises […] if the delay is being made because of some sort of pressure to be exerted on Pakistan’s nuclear [programme].”
In response, Ishaq Dar told the special session in categorical terms that there would be no compromise on the country’s nuclear and missile programmes.
“Let me assure you that nobody is going to compromise anything on the nuclear or the missile programme of Pakistan… no way,” he had added.
The minister promised the moment the staff-level agreement and EFFP (Extended Fund Facility programme) was finalised, it would be placed on the website of the finance ministry.
He made it clear that nobody had any right to tell Pakistan what range of missiles it could have and what nuclear weapons it could possess.
“We have to have our own deterrence, as we represent the people of Pakistan and we have to guard our national interests,” he maintained.
APCC to meet today to decide budget outlay, targets
- APCC will meet at the Ministry of Planning today.
- Govt considering allocation for Diamer Basha Dam in budget.
- Total PSDP size would be proposed at Rs1,000bn.
ISLAMABAD: The Annual Plan Coordination Committee (APCC) is likely to recommend around Rs900-1,000 billion macroeconomic framework and size of the federal development outlay for the upcoming budget for the next fiscal year 2023-24, The News reported Friday.
In the federal budget, against the revised estimates of Rs111 billion in the outgoing financial year, the government is all set to recommend a Rs90 billion proposed allocation for the controversial Sustainable Development Goals Achievement Programme (SAP) for parliamentarians.
Now the arrangements are underway for further jacking up the allocation of the SDG Achievement Programme from Rs111 billion to Rs116 billion for the outgoing fiscal year.
Well-placed sources in the Cabinet Division told The News that parliamentarians belonging to Balochistan and Sindh provinces largely presented flood-related schemes under the SDG Achievement Programme in the current fiscal year.
The World Bank and Asian Development Bank (ADB) were also providing $3 billion in loans for flood-related schemes in the aftermath of the severe floods, so at least there should be some kind of mechanism to avoid overlapping at the cost of the national exchequer.
There were 50 to 60% of small development schemes in Sindh and Balochistan related to floods in the outgoing financial year.
There are reports that one political party, which is one of the major allies of the ruling coalition at the federal level, placed a condition that all funds on behalf of their parliamentarians should be handed over to the political leader, who would disburse their share to each parliamentarian belonging to the party.
All major allies of the Pakistan Democratic Movement-led government are beneficiaries of this SAP programme, as its funding has gone up from Rs68 billion at the initial level to Rs116 billion in the ongoing financial year.
The APCC, which is scheduled to meet in the Ministry of Planning today (Friday), will consider approval of the macroeconomic framework, including a real GDP growth rate of 3.5% and CPI-based inflation at 21% for the upcoming budget 2023-24.
According to the working paper prepared by the Ministry of Planning on Thursday, the Ministry of Finance gave an indicative budget ceiling for the Public Sector Development Programme (PSDP) to the tune of Rs700 billion for the next budget for 2023-24 but the Minister for Planning hoped that it would be jacked up to Rs800 billion under the directives of Prime Minister Shehbaz Sharif.
Now that the government has proposed an allocation of Rs200 billion for the Viability Gap Fund (VGF) executed through public-private partnerships (PPP), the total PSDP size would be proposed at Rs1,000 billion at the federal level for the next financial year.
The share of the National Highway Authority (NHA) in the proposed PSDP would be reduced, ranging from Rs90 billion to Rs100 billion for the next budget, mainly because the NHA remained unable to utilise the major chunk of the total allocated amount in the ongoing financial year.
The government is all set to propose allocations for flood mitigation and reconstruction efforts in the coming financial year. The government is also considering making an allocation for the Diamer Basha Dam in the coming budget for 2023-24.
Is Pakistan launching digital currency?
KARACHI: After making impressive progress in digital banking, the State Bank of Pakistan (SBP) is planning to launch a digital currency in the future, The News reported Friday.
Central Bank’s Digital Financial Services Group Additional Director Shoukat Bizinjo said that a large number of central banks around the world, including Pakistan’s, are studying CBBCs (callable bull/bear contracts) in order to launch digital currency in their respective countries.
Bizinjo — while speaking at the 16th international conference on Mobile Commerce 2023 — said: “Pakistan’s central bank is reviewing and consulting with other central banks in this regard (CBBCs and digital currency).”
They are leveraged investments that track the performance of the underlying assets without requiring investors to pay the full price required to own the actual assets. Bizinjo said that the SBP is also in consultation with local industrial players to introduce digital currency.
He said that Electronic Money Institutions (EMIs) have made remarkable progress in e-banking through the launch of e-money wallets for consumers and merchants, and other digital payment instruments such as prepaid cards and contactless payment instruments.
Currently, the country has four live commercial EMIs, including NayaPak, Finja, CMPECC, and Sada Tech Pakistan. EMIs have an outstanding e-money balance of Rs2 billion, managing 1.6 million e-money wallets and 2.4 million payment cards as of March 31, 2023.
There are around 12 EMIs at different stages of acquiring licenses from the central bank. There are also dozens of companies that are in constant talks with the SBP to become EMIs.
Pakistan rules out Plan B rumours in case of IMF programme failure
- Budgetary framework has been shared with IMF, says minister.
- Dr Pasha says IMF did not accept external financing gap of $4.5bn.
- Adds there is a trust deficit because of PTI govt.
ISLAMABAD: Minister of State for Finance Dr Aisha Ghaus Pasha has ruled out any possibility of contemplating upon any other option — Plan B — in case Pakistan fails to woo the International Monetary Fund (IMF) to revive the stalled loan programme, The News reported Friday.
“Let me say with clarity there were no other options that we are contemplating upon under Plan B in case of no revival of the Fund programme as the government was committed to reviving the IMF programme by completing the pending ninth review,” she said.
During a briefing of the National Assembly Standing Committee on Finance at the Federal Board of Revenue (FBR) headquarters, MNA Ali Pervez Malik questioned Dr Pasha about Plan B in case of failure to revive the IMF programme and said that there was talk about a dollar amnesty scheme to improve dollar liquidity.
The minister further revealed that the Fund did not accept the external financing gap of $4.5 billion assessed by Pakistan.
Dr Pasha disclosed that the IMF was still sticking to its projection of a financing gap of $6 billion for the ongoing financial year against Islamabad’s assessment of $4.5 billion on which assurances extended to the IMF by multilateral as well as bilateral creditors.
She went on to say that the government has shared the budgetary framework for the next fiscal year to satisfy the IMF. However, Pakistan has been waiting for the IMF’s response to share its recent steps to bridge the gap between interbank and open market rates on exchange rates, and assurances on external financing gaps.
It should be noted that a broader agreement on these three major conditions could only pave the way for striking a staff-level agreement.
The minister clarified that the sharing of budgetary numbers is not the part of ninth review as it will be part of the 10th review but Prime Minister Shehbaz Sharif has decided to share the numbers for the revival of the Fund programme.
A senior official of the State Bank of Pakistan informed the NA panel that the permission granted for credit cards from exchange companies to interbank rate would require $70 million to $100 million on average on a monthly basis and recommended the FBR for raising taxes on transactions through credit cards in foreign exchange in the upcoming budget to compress demands for increased foreign exchange requirements.
Dr Pasha said that there was a trust deficit, not because of the incumbent regime, but blamed the last PTI-led government for breaching the IMF agreement by doling out un-targeted fuel and electricity subsidies just before leaving the government in the last financial year.
She said that Saudi Arabia had granted assurances of $2 billion in additional deposits, while $1 billion have been committed by the United Arab Emirates (UAE).
The World Bank committed $450 million through the RISE-II programme loan and $250 million through Asian Infrastructure Investment Bank (AIIB).
The remaining are expected through Geneva pledges in the aftermath of flood assistance.
Pakistan, she said, secured financing assurances of $4.5 billion. Initially, it was planned that out of $6 billion, the government would get assurances on $3 billion before signing the staff-level agreement. She said that the government paid back $3 billion to commercial banks with the understanding that it would get re-financed these loans once the SLA is done.
“We also expect that after the revival of the IMF programme, other avenues of securing dollars will also open up” she added.
The ongoing IMF programme is going to expire on June 30 therefore the time is limited for completion of the pending 9th review under the $6.5 billion Extended Fund Facility (EFF).
If the staff-level agreement is reached by evolving a broader consensus on three contentious issues including external financing, budgetary framework, and sticking to the free market exchange rate then the programme will be revived otherwise the programme will be met with failure.
However, the sources said that Pakistan would be left with no other option but to seek another IMF programme next fiscal year keeping in view debt external repayments of $25 billion.
It does not include the current account deficit and if it is projected in the range of $7-8 billion for the next fiscal year then the total external financing requirements will be stretched up to $32-33 billion in 2023-24.
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