ISLAMABAD: Pakistan needs another IMF program and support from other multilateral lenders beyond the next election cycle and the ongoing standby agreement, according to the Washington-based global lender.
The Dawn newspaper reported the International Monetary Fund said as much in a 120-page report published on Tuesday, which analyzed the macroeconomic outlook for cash-strapped Pakistan.
The report is based on the Memorandum of Economic and Fiscal Policies (MEFP) signed by the Minister of Finance ishaq dar and the Governor of the State Bank, Jameel Ahmed.
“Resolving Pakistan’s structural challenges, including long-term BoP (balance of payments) pressures, will require continued adjustment and creditor support beyond the current program period,” the Fund said.
Last week, the IMF gave its final go-ahead to a $3 billion bailout program for Pakistan to support the government’s efforts to stabilize the country’s 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 Pakistan’s economic challenges were complex and multifaceted, and that the risks were exceptionally high.
“Addressing them requires strong 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,” he said.
For its part, according to the report, the government has internationally committed to immediately notify a Rs 5 per unit increase in electricity tariffs and a more than 40 per cent increase in gas tariffs, 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 electricity sector by notifying the recent rate increases determined by Nepra (National Electric Power Regulatory Authority) effective July 1, and notifying quarterly and monthly rate adjustments without delay.
The government also promised to renegotiate power purchase agreements with the remaining power producers (including the Chinese) or lengthen debt service terms.
In the gas sector, the government has committed to immediate notification of gas rate adjustments determined by Ogra, in addition to merging gas rates for both local and imported natural gas through a weighted average rate.
The government also pledged to protect the fiscal program as foreseen in the recent budget and other commitments to the IMF.
For this, the government will not allow supplementary grants for any additional unbudgeted spending above the level approved by parliament in the current fiscal year, at least until the formation of a new government after the elections (except in case of a severe natural disaster).
The government also pledged not to launch any new tax amnesties or grant new tax breaks in 2023-24, even through budget or statutory regulatory orders without prior (assembly) approval.
The government has also provided agreements with each province on their commitment to achieve a fiscal position by the end of FY24 consistent with the FY24 general government primary balance target of Rs 401 billion and a continued focus on urgent energy sector policies, including the introduction of no fuel subsidy or cross-subsidy scheme, in FY23 and beyond.
In addition, the government has committed to ensuring monetary and financial stability by returning to a market-determined exchange rate, reducing inflation toward the target, and rebuilding foreign exchange reserves.
It said that the authorities would refrain from providing guidance or expressing a preference to market participants regarding the exchange rate or regulating the demand for foreign exchange through administrative action (whether formal or informal).
Once proper market functioning is restored, the authorities have committed to keeping the average premium between interbank and open market rates at no more than 1.25 percent and no less than minus 1.25 percent for any period of five consecutive business days and to publish the interbank and open market exchange rates daily, Dawn reported.
The report shows that he would have to return to the donor next month to seek a new loan.
The Dawn newspaper reported the International Monetary Fund said as much in a 120-page report published on Tuesday, which analyzed the macroeconomic outlook for cash-strapped Pakistan.
The report is based on the Memorandum of Economic and Fiscal Policies (MEFP) signed by the Minister of Finance ishaq dar and the Governor of the State Bank, Jameel Ahmed.
“Resolving Pakistan’s structural challenges, including long-term BoP (balance of payments) pressures, will require continued adjustment and creditor support beyond the current program period,” the Fund said.
Last week, the IMF gave its final go-ahead to a $3 billion bailout program for Pakistan to support the government’s efforts to stabilize the country’s 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 Pakistan’s economic challenges were complex and multifaceted, and that the risks were exceptionally high.
“Addressing them requires strong 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,” he said.
For its part, according to the report, the government has internationally committed to immediately notify a Rs 5 per unit increase in electricity tariffs and a more than 40 per cent increase in gas tariffs, 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 electricity sector by notifying the recent rate increases determined by Nepra (National Electric Power Regulatory Authority) effective July 1, and notifying quarterly and monthly rate adjustments without delay.
The government also promised to renegotiate power purchase agreements with the remaining power producers (including the Chinese) or lengthen debt service terms.
In the gas sector, the government has committed to immediate notification of gas rate adjustments determined by Ogra, in addition to merging gas rates for both local and imported natural gas through a weighted average rate.
The government also pledged to protect the fiscal program as foreseen in the recent budget and other commitments to the IMF.
For this, the government will not allow supplementary grants for any additional unbudgeted spending above the level approved by parliament in the current fiscal year, at least until the formation of a new government after the elections (except in case of a severe natural disaster).
The government also pledged not to launch any new tax amnesties or grant new tax breaks in 2023-24, even through budget or statutory regulatory orders without prior (assembly) approval.
The government has also provided agreements with each province on their commitment to achieve a fiscal position by the end of FY24 consistent with the FY24 general government primary balance target of Rs 401 billion and a continued focus on urgent energy sector policies, including the introduction of no fuel subsidy or cross-subsidy scheme, in FY23 and beyond.
In addition, the government has committed to ensuring monetary and financial stability by returning to a market-determined exchange rate, reducing inflation toward the target, and rebuilding foreign exchange reserves.
It said that the authorities would refrain from providing guidance or expressing a preference to market participants regarding the exchange rate or regulating the demand for foreign exchange through administrative action (whether formal or informal).
Once proper market functioning is restored, the authorities have committed to keeping the average premium between interbank and open market rates at no more than 1.25 percent and no less than minus 1.25 percent for any period of five consecutive business days and to publish the interbank and open market exchange rates daily, Dawn reported.
The report shows that he would have to return to the donor next month to seek a new loan.
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