IMF to pay bailout by August, report says
The IMF board will meet on August 29 to approve a bailout package for cash-strapped Pakistan. The development follows the completion of bilateral funding of $4 billion from four friendly countries, including China and Saudi Arabia, and would pave the way for immediate disbursement, which is expected to be in Pakistan’s account before the end. working hours on August 31.
The IMF executive board will meet on August 29 to approve a rescue package for cash-strapped Pakistan this month, including the pending disbursement of about $1.18 billion, it reported on Saturday. a media. The development follows the completion of bilateral funding of $4 billion from four friendly countries, including China and Saudi Arabia, and would pave the way for immediate disbursement, which is expected to be in Pakistan’s account before the end. working hours on August 31.
Finance Minister Miftah Ismail told Dawn that a Letter of Intent (LOI) was received early Friday from the lender to restart the program under the Staff Level Agreement (SLA) and the Memorandum of Economic and Fiscal Policies (MEFP) signed last month. We go through the letter of intent, sign and send
Sources said the board will meet on August 29 to consider the case of Pakistan for approval of the completion of the seventh and eighth reviews of the expanded financial mechanism (EFF), in addition to a $1 billion increase in program size to $7. billion dollars and the extension of his term until August 2023. They also said that the board meeting was called after Saudi Arabia, the United Arab Emirates, Qatar and China confirmed to the IMF that they had reached agreements for bilateral financing of $4 billion to Pakistan, which was the latest snag in the bailout after the completion of all prior actions agreed under the SLA.
The IMF board approval was expected to reverse the continued depletion of foreign exchange reserves, strengthen the Pakistani rupee and support the balance of payments. With an increase in the Petroleum Development Tax on petroleum products on July 31, the IMF had publicly confirmed that Pakistan had completed all prior actions for the revival of its program but had tied the approval of the disbursement of 1.18 billion dollars by its Board of Directors upon confirmation of additional inflows of 4 billion USD from the four friendly countries.
The finance minister had previously claimed to have lined up $8.5-10 billion inflows from friendly countries against an IMF-estimated $4 billion financing gap, but at the same time blamed political unrest in the country of the sharp depreciation of the currency and a bullish stock market. The IMF had announced on July 13 a long-awaited services-level agreement with Pakistan on a nine-month extension of the duration and a $1 billion increase in the size of the bailout package to $7 billion, including an initial disbursement of approximately $1.18. billion.
Its approval by the IMF’s board was, however, tied to a series of prior actions that the government has taken over the past two weeks. In addition to this, the IMF also required the authorities to stand ready to take any additional measures necessary to achieve the program objectives, given the high uncertainty in the global economy and financial markets.
Since then, the government has waived taxes on small traders and decided to impose more than 40 billion rupees worthy of additional taxes to compensate for an additional invisible subsidy needed to bail out the state-owned Pakistan State Oil of which more than 610 billion of rupees are stuck with the government, its entities or private companies being suffocated by non-payments from the public sector. Similarly, the government is also committed to ensuring the timely implementation of electricity tariff rebasing, as already determined by the electricity regulator, as well as quarterly and monthly adjustments to curb the increase in circular debt which the Fund estimated to have increased by 850 billion rupees last year at the end of June. 30. The government has now notified a timetable for a gradual increase in electricity tariffs.
The government has since also revised the development tax on petroleum products and set the rate at Rs 20 on petrol and Rs 10 per liter on high speed diesel, light diesel and kerosene the latest prior action in the commitment framework. The Initial Expanded Financing Facility (EFF) worth USD 6 billion over 39 months agreed in 2019 and provided to countries facing severe payment imbalances due to structural impediments or slow growth and inherently weak balance of payments position was due to end in September of this year. , but only three tranches of about $3 billion have so far been able to be disbursed as the program suffered repeated outages, according to Dawn.
Since Imran Khan’s ouster in April, Pakistan’s currency has fallen to an all-time low of 240 amid uncertainty over IMF aid. Earlier this month, New York-based rating agency S&P Global revised Pakistan’s long-term ratings from ‘stable’ to ‘negative’ in light of soaring inflation and tougher conditions. global financials.