Business

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

Published

2 years ago

Farwa

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.

Business

Pakistan’s $1.1 billion loan tranche is approved by the IMF board.

Published

14 seconds ago

Farwa

The cash is the third and last installment of a $3 billion standby agreement with the international lender that it obtained to prevent a sovereign default last year and that expires this month.

Following the discussion of Pakistan’s request for the release of funds at today’s IMF Executive Board meeting in Washington, the final tranche was authorized.

Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month about the last assessment of a $3 billion loan package.

The total amount of $1.9 billion that the nation has received thus far is divided into two tranches: $1.2 billion in July and $700 million in January 2024.

According to Finance Minister Muhammad Aurangzeb, Islamabad could have a staff-level agreement on the new program by early July. Pakistan is asking the IMF for a fresh, longer-term loan.

In order to support macroeconomic stability and carry out long-overdue and difficult structural changes, Islamabad says it is seeking a loan for a minimum of three years; however, Aurangzeb has reluctant to specify the specific program in question. If approved, it would be Pakistan’s 24th IMF bailout.

See Also: Pakistan formally requests new IMF assistance

The event transpired on the day following Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva, during which he reaffirmed the government’s resolve to restart Pakistan’s economy.

During the meeting held in conjunction with the World Economic Forum Special Meeting, the prime minister announced that he had given his finance minister, Muhammad Aurangzeb, strict instructions to implement structural reforms, maintain strict fiscal discipline, and pursue prudent policies that would guarantee macroeconomic stability and continuous economic growth.

Georgieva was commended by him for helping Pakistan obtain the $3 billion Standby Arrangement (SBA) from the IMF last year, which was about to be finalized.

Business

Macroeconomic circumstances in Pakistan have improved.

Published

7 mins ago

Farwa

By virtue of the Board’s resolution, SDR 828 million, or roughly $1.1 billion, can be disbursed immediately, increasing the total amount disbursed under the arrangement to SDR 2.250 billion, or roughly $3 billion.

After being adopted by the Executive Board on July 12, 2023, Pakistan’s nine-month SBA effectively served as a framework for financial support from both bilateral and multilateral partners, as well as a policy anchor to resolve imbalances both domestically and internationally.

According to the official announcement from the IMF, Pakistan’s macroeconomic conditions have improved during the program. Given the ongoing recovery in the second half of the fiscal year, growth of two percent is anticipated in FY24.

With a primary surplus of 1.8 percent of GDP in the first half of the fiscal year 2024—well ahead of expectations and putting Pakistan on track to meet its target primary surplus of 0.4 percent of GDP by the end of the fiscal year—the country’s fiscal condition is still strengthening.

Even while it is still high, inflation is still falling and should end up at about 20 percent by the end of June if data-driven and adequately tight monetary policy is continued.

In contrast to 11.4 per cent last year, the IMF predicted in an official statement that Pakistan’s tax collection and grants will stay at 12.5% of GDP in FY2024.

After remaining at 7.8% of GDP in FY2023, the deficit is predicted to stay at 7.5% of GDP in FY2024.

Business

Pakistan’s fuel prices should drop.

Published

25 mins ago

Farwa

At 0423 GMT, U.S. West Texas Intermediate crude prices fell 13 cents, or 0.16%, to $82.50 a barrel, while Brent crude futures down 10 cents, or 0.11%, to $88.30 a barrel.

Both benchmarks’ front-month contracts saw losses of over 1% on Monday.

on line with the worldwide trend, the price of gasoline is anticipated to decrease by Rs. 5.4 per liter on the local market. In the same way, buyers in the Pakistani market may see a drop in the price of diesel of Rs8 a litre.

Additionally, it is anticipated that the prices of light fuel and kerosene will decrease by Rs5.40 and Rs8.3 per liter, respectively.

The finance ministry will receive a summary from the Oil and Gas Regulatory Authority (OGRA), and PM Shehbaz Sharif will be consulted before a final decision is made today.

The federal government raised the cost of gasoline by Rs. 4.53 per liter and diesel by Rs. 8.14 per liter at the most recent review.

At the moment, the price of gasoline was Rs 293.94 per liter, while the price of high-speed diesel was Rs 290.38 per liter.