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ISLAMABAD: Pakistan needs another IMF program and support from other multilateral lenders after the upcoming election cycle and the ongoing standby arrangement, according to the Washington-based global lender.
The International Monetary Fund said so in a 120-page report released on Tuesday, which analyzed the macroeconomic outlook for cash-strapped Pakistan, Dawn reported.
The report is based on the Memorandum on Economic and Fiscal Policy (MEFP) signed by the Minister of Finance Ishaq Dar And Governor of the State Bank, Jamil Ahmed.
“Resolving Pakistan’s structural challenges, including long-term balance of payments pressures, will require continued adjustment and creditor support beyond the current program period,” the fund said.
The International Monetary Fund last week gave a final nod to Pakistan’s $3 billion bailout program to support the government’s efforts to stabilize the country’s ailing economy.
“A potential successor arrangement could help anchor the policy adjustment needed to restore Pakistan’s medium-term viability and ability to pay,” the report said.
The IMF assessment noted that the economic challenges facing Pakistan were complex and multifaceted, and that the stakes were exceptionally high.
“Addressing them will require consistent implementation of agreed policies, as well as continued financial support from external partners. Consistent and decisive implementation of program agreements will be essential to reduce risks and maintain macroeconomic stability.
For its part, according to the report, the government made an international undertaking for immediate notification of a Rs 5 per unit increase in electricity prices and a 40 percent increase in gas prices, as the circular debt of the gas sector is now competing with the losses of the power sector.
It has committed to address the drivers of circular debt flow in the energy sector by notifying the recent tariff increases set by Nebra (National Electric Power Regulatory Authority) as of July 1, and notifying quarterly and monthly tariff adjustments without delay, ready to take prompt action. Additional actions if specified revenue targets are not met.
The government has also promised to renegotiate power purchase agreements with the remaining energy producers (including the Chinese) or to extend their debt servicing.
In the gas sector, the government has committed to prompt notification of gas tariff adjustments set by Ugra, along with amalgamation of gas rates for both domestic and imported natural gas through a weighted average tariff.
The government has also undertaken to block the fiscal program as envisioned in the last budget and other commitments with the International Monetary Fund.
For this, the government will not allow supplemental grants for any additional unbudgeted spending above the parliamentary level approved in the current fiscal year, at least until the formation of a new government after the election (except in the event of a severe natural disaster).
The government also gave “a commitment not to launch any new tax breaks or grant more new tax breaks in 2023-24 including through budget or statutory regulatory orders without (the assembly’s) prior approval.”
The government has also made agreements with each province on their commitment to achieve a fiscal position at the end of FY24 consistent with the general government’s basic balance target for the fiscal year of Rs. Cross-subsidy system, in fiscal year 23 and beyond.
In addition, the government has committed to ensuring monetary and financial stability by returning to a market-determined exchange rate, decreasing inflation toward the target, and rebuilding foreign exchange reserves.
It said the authorities would refrain from providing guidance or expressing a preference to market participants regarding the exchange rate or regulating demand for forex through administrative procedures (whether formal or informal).
Once the proper functioning of the market has been restored, the authorities have committed to maintain the average premium between interbank and open market exchange rates of no more than 1.25 percent and no less than 1.25 percent over any business period of five consecutive business days and to post daily interbank and open market exchange rates, Dawn reported.
The report shows that he will have to return to the donor next month to obtain a new loan.
The International Monetary Fund said so in a 120-page report released on Tuesday, which analyzed the macroeconomic outlook for cash-strapped Pakistan, Dawn reported.
The report is based on the Memorandum on Economic and Fiscal Policy (MEFP) signed by the Minister of Finance Ishaq Dar And Governor of the State Bank, Jamil Ahmed.
“Resolving Pakistan’s structural challenges, including long-term balance of payments pressures, will require continued adjustment and creditor support beyond the current program period,” the fund said.
The International Monetary Fund last week gave a final nod to Pakistan’s $3 billion bailout program to support the government’s efforts to stabilize the country’s ailing economy.
“A potential successor arrangement could help anchor the policy adjustment needed to restore Pakistan’s medium-term viability and ability to pay,” the report said.
The IMF assessment noted that the economic challenges facing Pakistan were complex and multifaceted, and that the stakes were exceptionally high.
“Addressing them will require consistent implementation of agreed policies, as well as continued financial support from external partners. Consistent and decisive implementation of program agreements will be essential to reduce risks and maintain macroeconomic stability.
For its part, according to the report, the government made an international undertaking for immediate notification of a Rs 5 per unit increase in electricity prices and a 40 percent increase in gas prices, as the circular debt of the gas sector is now competing with the losses of the power sector.
It has committed to address the drivers of circular debt flow in the energy sector by notifying the recent tariff increases set by Nebra (National Electric Power Regulatory Authority) as of July 1, and notifying quarterly and monthly tariff adjustments without delay, ready to take prompt action. Additional actions if specified revenue targets are not met.
The government has also promised to renegotiate power purchase agreements with the remaining energy producers (including the Chinese) or to extend their debt servicing.
In the gas sector, the government has committed to prompt notification of gas tariff adjustments set by Ugra, along with amalgamation of gas rates for both domestic and imported natural gas through a weighted average tariff.
The government has also undertaken to block the fiscal program as envisioned in the last budget and other commitments with the International Monetary Fund.
For this, the government will not allow supplemental grants for any additional unbudgeted spending above the parliamentary level approved in the current fiscal year, at least until the formation of a new government after the election (except in the event of a severe natural disaster).
The government also gave “a commitment not to launch any new tax breaks or grant more new tax breaks in 2023-24 including through budget or statutory regulatory orders without (the assembly’s) prior approval.”
The government has also made agreements with each province on their commitment to achieve a fiscal position at the end of FY24 consistent with the general government’s basic balance target for the fiscal year of Rs. Cross-subsidy system, in fiscal year 23 and beyond.
In addition, the government has committed to ensuring monetary and financial stability by returning to a market-determined exchange rate, decreasing inflation toward the target, and rebuilding foreign exchange reserves.
It said the authorities would refrain from providing guidance or expressing a preference to market participants regarding the exchange rate or regulating demand for forex through administrative procedures (whether formal or informal).
Once the proper functioning of the market has been restored, the authorities have committed to maintain the average premium between interbank and open market exchange rates of no more than 1.25 percent and no less than 1.25 percent over any business period of five consecutive business days and to post daily interbank and open market exchange rates, Dawn reported.
The report shows that he will have to return to the donor next month to obtain a new loan.
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