ISLAMABAD: IMF has set tough preconditions like raising electricity tax rates and imposing duties on petroleum products to revive stalled $6 billion bailout for Pakistan, media outlets The news agency said on Wednesday, days after the cash-strapped country reached an agreement with a global lender on a much-needed lending facility.
The International Monetary Fund has also asked Pakistan to set up an anti-corruption task force to review all existing laws to limit graft in government agencies, the report cited sources. said.
After fulfilling the conditions, the IMF will submit Pakistan’s request for loan phase approval and program reinstatement to its executive board – a process that could take another month, Dawn reported.
The new conditions set by the IMF include an increase in electricity prices, the cabinet’s decision to gradually impose a petroleum tax of Rs 50 per liter to collect Rs 855 billion and an end to the government’s role in determining oil prices. Express Tribune reported.
The requests come amid the government’s decision to ask Congress on Wednesday to amend the Petroleum Products (Petroleum Tax) Ordinance, 1961.
The proposed law is amended to impose a petrol tax of Rs 50 per liter on high-speed diesel, gasoline, high-octane blends (HOBC), E-10 gasoline, premium kerosene and light diesel .
It has also proposed a tariff of Rs 30,000 per tonne of liquefied petroleum gas.
Cash-strapped Pakistan is facing growing economic challenges, with high inflation, sliding foreign exchange reserves, a widening current account deficit and a depreciating currency.
On June 22, Pakistan reached an agreement with the IMF to restore the stalled $6 billion aid package and open the door to funding from other international sources.
The make-or-break deal was reached after the IMF staff delegation and the Pakistan team, led by Finance Minister Miftah Ismail, agreed on an understanding of the 2022-23 budget after authorities pledged end up increasing tax by Rs 43,600 crore and gradually increasing tax on petrol. up to Rs 50 per liter, Dawn reports.
The $6 billion expansion fund base package was agreed in July 2019 for a duration of 39 months. So far, only half of the promised amount has been refunded.
The revival of this facility will immediately provide access to the $1 billion that Pakistan desperately needs to bolster its dwindling foreign exchange reserves.
In the draft document Memorandum of Understanding on Economic and Financial Policies (MEFP), the IMF proposed two pending programs – the 7th and 8th – but did not indicate that they also will approve loans worth $2 billion.
The MEFP will form the basis for the staffing agreement that the Pakistani government will try to achieve as soon as possible.
However, Finance Minister Ismail said Pakistan had received the MEFP document showing the consolidation of the seventh and eighth assessments of the relief program and that the country would receive a loan of $1.9 billion. after approval.
The Express Tribune quoted sources as saying that in its draft MEFP document, the IMF did not mention increasing the loan size to $1.9 billion. The issue of increasing the loan size will be discussed by both sides.
Pakistan desperately needs the revival of the IMF package to revive the international community’s confidence in its economic policy to gain investment and access to global lending institutions.