The International Monetary Fund (IMF) delegation left Pakistan after a 10-day stay, during which intense talks were held on the revival of the $7 billion loan program and the release of the $1.2 billion tranche that the country desperately needs.
With the team gone, everyone seems to be wondering, what next?
The IMF delegation has left, but where is the agreement? This question is stuck in everyone’s mind. Confusion reigned throughout the day after the IMF team left after issuing a statement stating that virtual talks would continue.
The possible release of the IMF tranche had increased the investors’ confidence.
The rupee appreciated and the stock exchange remained bullish in anticipation of the positive outcome of the talks, but Friday morning was different. The stocks plunged by 568 points due to the delay.
To clear the uncertainty that had gripped the nation, Finance Minister Ishaq Dar held a press conference to divulge details of the outcome.
He informed the media that the IMF had given the government the Memorandum of Economic and Financial Policies (MEFP) regarding the completion of the ninth review of the $7 billion loan program.
This meant that a staff-level agreement had not materialized.
The MEFP, as readers are aware, is a document that outlines all conditions and policies upon which the two parties declare the staff-level agreement.
Both sides discuss policy measures mentioned in the document and once these are finalized, a staff-level agreement is signed, which is then forwarded to IMF’s Executive Board for approval.
The finance minister, meanwhile, was adamant in the presser that there was no confusion, however, he insisted that it would take a few more days for things to shape up.
“We insisted that they (the Fund delegation) give us the MEFP before leaving so we could look at it over the weekend,” Mr Dar said, confirming that the MEFP draft had been received and that they would review it over the weekend.
He added that reforms in certain sectors that the IMF was insisting on were in the interest of the country.
During the talks with the IMF, Pakistan agreed to enforce taxes amounting to Rs170 billion, reduce untargeted subsidies in gas and energy sectors, ensure that there is zero addition to the gas sector’s circular debt, increase the petroleum development levy on diesel, take it to Rs50 through two Rs5 hikes on March 1 and April 1 and raise the allocation of the Benazir Income Support Programme to Rs400 billion from Rs360 billion.
Meanwhile, a stock exchange expert linked Friday’s bearish trend to the delay in the outcome of talks, fearing that if the delay persisted, stocks would continue to fall.
And to rub salt into the wound, foreign exchange reserves fell to $2.916 billion during the week ending on Feb 3 due to external debt repayments worth $170 million.
The finance minister, however, seems least worried.
H said Pakistan had also survived on $414m in foreign reserves and that the State Bank of Pakistan was managing.
Pinning hopes on friendly countries, he said commitments with them would be fulfilled and inflows would be received.
Here, it must be added that our honourable Chief Justice of Pakistan Umar Ata Bandial, while hearing a case pertaining to the Federal Board of Revenue’s challenge to the Lahore High Court’s bar on the bureau from collecting a “super tax” from industries, advised the government to stem foreign currency smuggling.
He rejected the notion that the country was heading towards bankruptcy.
The chief justice is right. Stringent steps are needed to check the smuggling of dollars and stop the rupee’s depreciation.
With a few weeks of reserves left and the petroleum stocks of 20 days remaining, things do not look very encouraging.
The fuel shortage in Punjab was just a trailer.
