Pakistan wants ‘larger, longer’ IMF bailout, PIA privatization by early July — FinMin
ISLAMABAD: Finance Minister Muhammad Aurangzeb said on Monday Islamabad was seeking a “larger and longer” bailout program from the International Monetary Fund, whose mission would arrive in Islamabad within the next ten days to start discussing a new loan deal.
Pakistan last month completed a short-term $3 billion program, which helped stave off sovereign default, but the government of Prime Minister Shehbaz Sharif has stressed the need for a fresh, longer term program.
Pakistan’s financial year runs from July to June and its budget for fiscal year 2025, the first by Sharif’s new government, has to be presented before June 30.
The IMF has not specified the dates of its Islamabad visit, nor the size or duration of any new program.
“We have requested the IMF … that we want to go into a larger and a longer program with the fund and they have acceded that request, and we are expecting the mission to arrive here within a week to 10 days, where we will start discussing the contours of the next program,” Aurangzeb said while addressing a conference in Islamabad.
He said Pakistan needed a new IMF program to bring “permanence” to macroeconomic stability and continue to carry out “structural reforms.”
The IMF has said accelerating reforms was more important than the size of a new program, which would be guided by a package of reforms and balance of payments needs.
Under the last $3 billion bailout, Pakistan implemented several IMF-mandated reforms, such as budget adjustments, increasing interest rates, and higher energy prices.
Among expected reforms under a new program are strengthening public finances through gradual fiscal consolidation, broadening the existing tax base and improving tax administration, and debt sustainability, all while protecting the vulnerable.
Pakistan also needs to restore the viability of the energy sector and prevent further accumulation of circular debt arising from subsidies and unpaid bills. Other reforms will include cutting inflation, stimulating private sector growth and adopting a market-driven exchange rate to help balance external accounts and rebuild foreign reserves.
PIA PRIVATIZATION
“We have to broaden our tax base,” the finance minister said, outlining reforms under new IMF deal. “Our tax to GDP [ratio] is languishing at about 9 percent … we have to start moving it toward 14- 15 percent.”
“We have to start resolving the complex energy equation … And the third one is the SOE [state-owned enterprises] reform,” Aurangzeb said. “Our prime minister has been very clear that the government has no business being in business … We need to and we will accelerate the privatization agenda.”
He said he hoped that PIA, the national carrier, and other privatization deals would get through the “finishing line” by early July.
Last week, Pakistan pushed back the deadline for companies to express interest in buying PIA to May 18, a day before the expressions had originally been due. The privatization commission says 10 companies have already expressed an interest.
Pakistan’s government has previously said it was putting on the block a stake of between 51 percent and 100 percent in the loss-making airline.
The disposal of the flag carrier is a step that past elected governments have steered away from as it is likely to be highly unpopular, but progress on privatization is key to helping cash-strapped Pakistan pursue further funding talks with the IMF.