ISLAMABAD:
Pakistan and the International Monetary Fund (IMF) narrowed their disagreements on Friday after Islamabad pledged to make budget revisions and immediately lift import restrictions.
According to sources, the government assured the IMF that it was willing to make modifications on both the budget and taxes fronts. The offer was comparable to approximately 0.3% of GDP, but it was roughly half of the gap identified by the global lender, they claimed.
According to the sources, the government proposed to cut expenses by Rs200 billion and impose new taxes at Rs100 billion.
The authorities were optimistic that if the ongoing round of talks was successful, a staff-level agreement might be reached as soon as possible. According to the sources, things have been moving at a breakneck rate since Thursday.
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The finance ministry made no official remark on the news
The talks lasted till late at night as the IMF pushed Pakistan to make additional changes. The offer made by Pakistan was approximately Rs300 billion based on the predicted size of the economy for the following fiscal year, but the exact value could not be verified.
If the IMF and Pakistan reach an agreement, Finance Minister Ishaq Dar may announce the modifications during his statement to the National Assembly, which will conclude the budget debate.
On the condition of anonymity, a senior government official stated that Pakistan has reached the halfway point and that the IMF should now come forward and bridge the gap.
Pakistan has failed to receive $2.6 billion of the $6.5 billion overall programme size due to the bailout package’s unfinished 9th, 10th, and 11th evaluations.
Prime Minister Shehbaz Sharif and Finance Minister Dar have frequently stated that Pakistan has completed all preceding actions and that the IMF should approve the next $1.2 billion loan tranche immediately.
The programme expires on June 30, and IMF Managing Director Kristalina Georgieva notified the prime minister over the phone on May 27 that it could not be extended longer.
According to the sources, the IMF has once again requested that the government rescind the amnesty scheme. The administration has proposed a no-questions-asked programme for bringing in up to $100,000 from outside, which the IMF has described as setting a “damaging precedent.”
The IMF also ordered Pakistan to rescind recently planned tax exemptions, which the government stated were vital to meeting the 3.5% GDP growth objective for the next fiscal year. The IMF chief preferred that all policy issues be addressed at the IMF staff level.
According to the sources, budget modifications are being recommended against the allocations for subsidies and grants. They emphasised that after these changes, fresh pink books and the budget-in-brief may need to be issued.
The prime minister had previously stated that all prior actions for the 9th review under the Extended Fund Facility (EFF) had been completed and that the government was completely committed to meeting its IMF obligations.
The State Bank of Pakistan (SBP) revoked an advise to banks six months ago to limit imports in a major step on Friday.
Because of administrative curbs on imports, Pakistan’s current account deficit shrank to $2.9 billion in the first 11 months of this fiscal year.
The IMF considers the improvement to be artificial and a market distortion. The SBP directive of December 27, 2022, irritated Pakistan-IMF discussions. Pakistan has previously stated that it will retract these directives beginning in March of this year, but it has failed to do so.
The central bank had authorised commercial banks to open letter of credit exclusively for wheat, edible oil, pharmaceutical, energy imports, export-oriented sector imports, and agricultural input imports.
According to the sources, the IMF addressed the issue of exchange market distortions once more, to which Pakistani officials responded that
