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In Washington meeting, Ishaq Dar to ask IMF to revise macroeconomic framework

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  • Ishaq Dar to attend IMF/World Bank meetings from Oct 10 to 16.
  • Pakistan to formally request IMF to give concessions on loan conditions.
  • IMF says policy commitments made by Pakistan to continue to apply.

Amid controversy over the new petrol price announced by the government which has been termed a “reckless” decision, Finance Minister Ishaq Dar will travel to Washington next week and hold meetings with the International Monetary Fund (IMF), seeking to revise the macroeconomic framework.

“Pakistan’s Minister for Finance Ishaq Dar will participate in the upcoming annual meeting of the IMF/WB,” a top official of the Finance Ministry confirmed while talking to The News on Wednesday.

In a surprise move last week, the federal government slashed the prices of petroleum products sparking debate about whether the move is in line with the IMF deal and former minister Miftah Ismail termed it a “reckless” move.

However, Dar responded to his predecessor by saying he knows how to deal with the IMF while state minister for finance Aisha Ghous Pasha added that the announcement didn’t violate the loan agreement.

The IMF had also said that policy commitments made by the Pakistani authorities as part of the seventh and eighth reviews under their support program continue to apply.

The publication, quoting unnamed sources, said that Pakistan will make a formal request to the IMF high-ups for revising the macroeconomic framework for the current fiscal year 2022-23 by lowering the GDP growth rate, hiking inflation and upward adjustments of twin deficits known as the budget deficit and current account deficit.

Islamabad is all set to make a request to the IMF for making the conditions attached to the Extended Fund Facility (EFF) lenient, especially freezing fuel price adjustment of electricity and petroleum development levy on POL products for the next few months to provide some relief to the inflation-stricken masses.

Pakistan, the report said, will also request to relax the budget deficit target for the current fiscal year as severe floods might damage its revenue mobilisation efforts and increase pressures on the expenditure front.

The government has restricted the budget deficit target at 4.9% for the current fiscal year under the IMF programme and throwing a revenue surplus of Rs153 billion till the end of June 2023.

The request for revising the macroeconomic framework will be made for the current fiscal year in the wake of severe floods that have caused devastation and required construction costs of over $30 billion for the struggling economy of Pakistan.

As per the report, Secretary Economic Affairs Division Kazim Niaz had already departed Islamabad for Washington to attend the upcoming meetings of Breton Wood Institutions.

Under the macroeconomic framework, the government has assessed that the country’s GDP growth might hover around 2% for the current fiscal year against the initially envisaged target of 5%.

The economic loss has been estimated at Rs2.4 trillion for the current fiscal year. The government’s projections also show that unemployment projection will increase due to the loss of 1.8 to 2 million jobs and poverty may hike by 4.5 to 5%, implying that 9 to 12 million people will fall below the poverty line.

The agriculture growth is feared to remain negative in the range of -0.7% to -2.1% against the target of plus 3.9% for the current fiscal year. The government has estimated that the growth in major crops was expected to remain negative in the range of 14 to 15.4% for the current fiscal year. Around one million large and small animals have perished. The livestock growth is expected to remain between 2 to 3% against the desired target of 3.7 % for the current fiscal year.

The inflation will hike, to go up in the range of 23 to 25% for the current fiscal year against the initially envisaged target of 11.5%.

The government has not yet firmed up any specific number for the current account deficit but it is feared that it may go up from $9 billion to $12 billion for the ongoing financial year mainly because of decline in exports.

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The KSE-100 Index rises following a sharp decline in the previous session.

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The government is considering filing a treason case under Article 6 against PTI founder Imran Khan, former president Arif Alvi, and former deputy speaker Qasim Suri. On Tuesday, the KSE-100 Index was up more than 1.3% during early trading, following a day of roughly a 2 percent loss due to growing political unrest and the potential banning of the party.

However, the benchmark index of the Pakistan Stock Exchange was trading at 79,074.63 by 11:49 a.m., having gained 535.45 points, or 0.68 percent, after reaching an intraday high of 79,578.04.

Market analysts said that political tensions were the primary cause of the KSE-100’s earlier Monday decline of 1578.71 points, or 1.97 percent.

They did point out, though, that a correction was a reasonable reaction to the protracted upswing that allowed the benchmark mark index to reach 81,839.86 on July 18.

As a result of interest rate cuts and the possibility of another IMF program, the Pakistan Stock Exchange has gained 22.97 percent so far this year. The cycle began on June 10 with a 1.5 percent decrease in borrowing costs.

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In interbank trade, the US dollar crushes the Pakistani rupee.

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During interbank trade on Tuesday, the US dollar’s value increased by 15 paisas, reaching Rs 278.45.

It is important to remember that Fitch Business Monitor International expressed concern about the possibility that Pakistan’s economic stability may be jeopardized by the ongoing political unrest.

The fragile situation of Pakistan’s economic recovery was emphasized by Fitch in its most recent Pakistan Country Risk Report, which also noted that economic activity has been impeded by urban protests.

(PTI),In spite of multiple successful judicial appeals, the founder of Pakistan Tehreek-e-Insaaf (PTI) is expected to stay behind bars, the article notes, underscoring the fragile political environment.

With no urgent plans for new elections, this scenario suggests that the coalition administration will remain in office for the next 18 months.

Fitch also described an eventuality in which the government could change and be replaced by a technocratic administration. This suggests that the government of Pakistan would carry out the reforms demanded by the IMF, contributing to the 3.2% GDP growth expected in 2024–2025.

The policy rate has stabilized above projections, while the research predicted it may reach 16 percent this fiscal year and 14 percent the following year.

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Pakistan’s gold prices per kilogram dropped.

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When 24-karat gold dropped by Rs. 500 to Rs. 250,500 per tola on Tuesday, the price of gold fell once again on both the local and international gold markets.

By Rs429 to Rs214,763, 10 grams of gold cost less, according to the Gold Sellers Association.

Gold’s price per ounce dropped to $2391 on the international market by $11.

At Rs2920 per tola, the price of silver did not change.

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