ISLAMABAD (National Times) There can’t be any “Plan B” when one is in an IMF programme, said Finance Minister Muhammad Aurangzeb on Tuesday, as he argued that the holding talks with the Washington-based top lender for another loan package were necessary for ensuring economic stability.
Addressing the annual Business Summit 2024 at a local hotel in Islamabad, he also hoped that the International Monetary Fund (IMF) would release $1.1 billion – the outstanding amount under the $3bn Stand-By Arrangement (SBA) which expired on March 31 – in the third and last tranche.
Pakistan could secure a staff-level agreement on a new long-term larger loan with the IMF by early July, the finance minister said. “We are still hoping that we get a staff-level agreement by June or early July.”
If secured, it would be the 24th IMF bailout for Pakistan.
“We had very good discussions in Washington,” he said and added he did not know at this stage the volume and tenure of the longer programme, although he has previously said that he was looking for at least a three-year bailout plan.
The comments came as Pakistan is now aspiring for “bigger” and “longer” IMF programme that can fetch $6bn to $8bn and cover a period of three to four years.
Aurangzeb recently concluded a visit to Washington where he represented Pakistan at the annual spring meetings of IMF and World Bank while starting the process for a new deal with the Fund under the Extended Fund Facility (EFF) as well as seeking additional money under climate financing.
Now an IMF team is expected to visit Islamabad next month for formal dialogue during which the two sides discuss terms and conditions for the EFF and also ponder upon the application for climate financing as well as setting the nature of next budget.
By mentioning the absence of Plan B, the finance minister pointed to the fact that the IMF always sets tough condition before and after approving any loan programme, leaving very little to a recipient country to manoeuvre.
The minister said structural reforms would include increasing the government’s tax revenue-to-GDP ratio to 13 per cent to 14pc in next two or three years from the current level of around 9pc, reducing losses of state-owned enterprises (SOEs) through their privatisation, and better management of the debt-laden energy sector.
Aurangzeb stressed the need for economic reforms to stabilise the economy and put it on the right track for sustainable development.
The minister also called for energy sector reforms amid the rising circular debt, which are resulting in higher power and gas tariffs – a trend that has been reducing consumption at an alarming rate and increasing the cost of doing business to an unsustainable level.
However, the energy sector reforms are necessary given the fact that the current structure isn’t able to control losses and theft or bring efficiency to the system.
Aurangzeb used the platform to again press the case for increasing the tax-to-GDP ratio by expanding the tax base.
However, the goal would require including the retail, real estate and agriculture sectors among the taxpayers and depends upon the government’s will and ability to overcome the resistance.
On the other hand, he also made it clear that privatisation of lossmaking SOEs – which have been draining the scarce national resources – was necessary and said that the process must be swift.
However, Aurangzeb was positive about the future, saying that the foreign reserves were expected to touch $10bn by the end of current fiscal year and noted that the agriculture sector had been performing exceptionally well with a growth rate of over 5pc.
