ISLAMABAD: Despite obtaining a $5.3 billion bailout package from the IMF and multi billion dollars from other donors, Pakistan will be facing a financing gap of $1.2 billion during the current fiscal year that will result into drawing down of foreign current reserves continuously in 2013-14.
Finance Minister Ishaq Dar and Jeffrey Franks, the head of the visiting IMF staff mission, told a joint news briefing that Pakistan would have to take a number of prior actions, including reduction in fiscal deficit, implementation of an energy plan to put the sector on a stable footing, revival of the privatisation programme and making monetary policy adjustments and, above all, getting these steps approved by the political leadership at the federal and provincial levels to qualify for presentation of the package to the IMF management and executive board for approval.
Mr Dar said the two sides “have reached an agreement for a 3-year programme of at least $5.3bn under an Extended Fund Facility”.
He said Pakistan had requested the IMF management through a conference call to increase the present level of access of 348 per cent of quota ($5.3bn) to 500pc of quota ($7.3bn) with appropriate front loading of disbursements to match Pakistan’s repayment obligations under the previous IMF program-me so that net outflows are not more than fresh disbursements.
Answering a question about an increase in electricity rates as required under the programme, the minister said details of the tariff rationalisation would be announced by the prime minister as part of his energy plan, but the poorest of the poor would be protected from tariff adjustments.
“The borrowed money will be used to service external debts as we just cannot let Pakistan default on its payments, said he.
“We have not carried the begging bowl in our hands nor are we getting a grant, Pakistan is a member of IMF,” Dar said.
Dar said the Pakistan had targeted a fiscal deficit of 4 of gross domestic product (GDP) in the next three years.
“The interest rate will be set at 3 percent and that the loan will be payable over a longer period than conventional stand-by arrangements”, he said.
According to a declaration issued by the IMF after the agreement the government of Pakistan was advised to abolish all the SROs and tax exemptions, widen the tax tax net, and improve revenue collection.