Talks with IMF for 6th tranche to begin by month-end

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ISLAMABAD: Pakistan will start staff-level discussions with the International fund by end of the present month for the discharge of sixth tranche under the $6 billion Extended Fund Facility (EFF), a top official confirmed Dawn on Saturday.

The IMF board features a scheduled a gathering later this month to conduct its sixth review of Pakistan programme. “Our technical team will start virtual discussions with the IMF technical team on Sept 29,” minister of finance Shaukat Tarin told Dawn.

He went on to mention that an inventory of issues to be discussed was received from the fund. “The final approval are going to be made in Washington by middle of next month.” Mr Tarin added.

The minister of finance are going to be in Washington for discussions with top IMF officials from Oct 15-17.

In July 2019, the IMF had approved a 39-month $6bn EFF arrangement for Pakistan to support Islamabad’s economic reform programme.

The government has paused the IMF programme for 3 months and implements its indigenous policy measures to prop up revenue rather than putting an additional burden on the prevailing taxpayers.

Mr Tarin said that the revenue performance within the first two months is beyond expectations. “We have proved that our strategy of revenue generation is best than the one prescribed by the fund,” the minister said, adding it might be even better than last year.

The minister said that his policy prescriptions paid dividends. “We are sticking to what we expect is true and that they are sticking to what they’re saying is true ,” the minister remarked.

It is worth mentioning that Oct 17 are going to be the Judgment Day of Mr Tarin as federal minister of finance representing Pakistan at top-level talks in Washington.

Mr Tarin’s visit will happen at the time of the expiry of the constitutional tenure as federal minister of finance as he had been given the portfolio on April 16 this year under Article 91(9) of the Constitution, which empowers the prime minister to appoint a non-elected person as a federal minister for 6 months.

The government has recently promulgated an ordinance to form it mandatory for an elected person to require oath within 60 days apparently to de-seat self-exiled former minister of finance Ishaq Dar to clear the seat for Mr Tarin to elect him as a senator.

Rupee slide
The rupee in recent weeks has weakened sharply against the dollar while the depository financial institution of Pakistan has yet to intervene to arrest the local currency’s slide.

Asked about the rate of exchange volatility, Mr Tarin said that ‘speculators’ created artificial demand. However, he admitted that there’s pressure on rate of exchange mainly due to speculation over balance of payment issues due to rising import bill. “This isn’t sustainable and has no base for support,” the minister warned speculators and predicted it’ll come down.

The rupee has hit a over year’s low, while the the depository financial institution projects that the present account deficit may widen by 2pc-3pc this financial year , against 0.6pc in FY21, on rising imports to support the expansion target of 4.8pc.

The minister ruled out the impression created through social media that the rupee will fall to Rs170. “We purchased $450m worth vaccines last month which has driven the country’s import bill,” the minister said.

He said the vaccine purchase is already financed by donor agencies. However, the acquisition has pushed up the import bill. He, however, agreed that it’ll have an impression on the balance of payments, which could enter negative.

The minister said speculators will get temporary benefits due to the pressures on the rupee.

“The depository financial institution of Pakistan is watching things and can intervene when required,” the minister said. However, he didn’t mention the extent when it’ll make it compulsory for SBP to intervene.

The minister said that the present rate of exchange at Rs166 or Rs167 is nearly 98pc real rate of exchange . He ignored the speculation that rate of exchange will cross Rs174 or beyond.

On the difficulty of accounting , the minister said that he was constantly reviewing the imports trends. “We will review just in case there are unnecessary imports,” the minister hinted at regulatory duties to hamper the imports of luxury items if required.

Besides, the spending on just one occasion import of vaccines the minister said that import bill is additionally swelled by the import of automobile sector especially CBUs. “We also will check out this issue”, the minister said, adding the car sector revives due to slowdown last year mainly hit by the Covid-19.

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