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Pak PM Sharif Meets IMF Chief To Break Deadlock Over Next Aid Tranche
PM Shehbaz Sharif also sought a reduction in the demand for higher electricity prices to compensate for a Rs 500 billion deviation from the annual circular debt management plan
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Pakistan’s Prime Minister Shehbaz Sharif has called IMF chief Kristalina Georgieva to break the deadlock over the release of the next tranche of assistance for cash-strapped Pakistan, according to a media report on Friday.
The contact was made four days before the prime minister and IMF chief was scheduled to meet on the sidelines of the Geneva Conference for flood victims.
There was no official word on the meeting. Still, sources told The Express Tribune that the prime minister asked the IMF managing director to reconsider the conditions for imposing new taxes.
He also sought to ease the demand for higher electricity prices to compensate for a Rs 500 billion deviation from the annual circular debt management plan.
These are the major impediments to reaching an initial understanding of an IMF staff visit to Pakistan.
“However, the government was prepared to impose a flood levy and a windfall income tax on commercial banks,” according to the sources.
There was also a determination on the Pakistani side to raise energy prices in the future in the event of further deviation. It was unclear whether the IMF MD promised to make any concessions.
On 18 November, Pakistan and the IMF held a round of engagement but were unable to agree on a timetable for formal talks on the long-overdue ninth review.
In August, the IMF board approved the seventh and eighth reviews of Pakistan's bailout programme, allowing for the release of more than USD 1.1 billion.
The IMF's much-needed bailout package saved Pakistan from default, despite persistent political uncertainty and devastating floods that displaced more than 33 million people.
As the economy continues to deteriorate, the premier called his Chinese counterpart, Li Keqiang, seeking Beijing's assistance in averting a looming default, while army chief General Asim Munir met the Saudi defence minister in Riyadh.
The contacts were made as the country's official foreign exchange reserves fell to USD 5.6 billion.
According to The Express Tribune, the prime minister's call to the IMF's head indicates that the finance ministry has been unable to break the gridlock for the past three months.
Finance Minister Ishaq Dar, in what appeared to be an alternative to the IMF, had expressed hope for a USD 3 billion second bailout from Saudi Arabia within days, vowing to raise funds through the sale of assets to shore up the critically low foreign exchange reserves. However, Saudi cash assistance can only postpone the default; it cannot solve the problem permanently.
According to the finance minister, the government is committed to the IMF programme. But at the same time, he added: We will not take measures that may increase the burden on the common man.
According to the Express Tribune, the IMF had previously requested a plan to end the additional Rs 500 billion circular debt, raise energy prices, impose new taxes, allow the rupee to regain its real value, and achieve primary budget surplus targets while excluding flood-related expenses, all of which would exacerbate inflation, which is already at 25 per cent.
Last year, the donor reactivated a USD 6 billion loan programme agreed upon in 2019 but was put on hold due to Pakistan's failure to meet its terms.
However, it has once again refused to release additional funds as Pakistan has failed to meet new commitments.