Pakistan ‘fulfills all requirements’ for new IMF deal on cards

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KARACHI: Pakistan ‘fulfills all requirements’ for new IMF deal on cards, Earlier this week, the Pakistan Muslim League-Nawaz coalition government announced that it hopes to secure a bailout package worth more than $6 billion from the International Monetary Fund (IMF), once it has met all of the lender’s requirements in its annual budget. Ali Pervaiz Malik, Minister of State for Finance, Revenue and Power, said that the loan could come as early as three or four weeks.

On June 12, the federal government presented its new budget with a tough revenue target in order to win approval from the International Monetary Fund for a loan under its medium-term Extended Fund Facility (EFF). This loan is intended to stave off another economic crisis. Despite anger about the new taxation measures which have been enacted, domestic anger is rising.

The government attempted to increase the collection of taxes by increasing the taxes on the already burdened salaried class, bringing exporters into the normal tax regime, increasing the petroleum levy to Rs70, and imposing new taxes on a variety of sectors to increase revenue.

It is our hope that we shall be able to conclude this (IMF) process within the next three to four weeks,” Malik told Reuters, with the aim of reaching an agreement at the staff level before next week’s IMF board meeting.

I believe the amount of the package will be north of $6 billion, he said when asked about the size of the package, though he added that at this point the primary focus was on ensuring the IMF’s validation.

As soon as a request for comment was made to the IMF, it did not respond immediately.

The financial minister Muhammad Aurangzeb had expressed optimism earlier on Sunday that the country would become eligible for another IMF bailout following President Asif Ali Zardari’s approval of the tax-heavy budget for the next fiscal year, which will begin on July 1.

As a matter of fact, IMF’s programme is our assurance in terms of macroeconomic stability. We are taking it forward; it is inevitable. “I’m a very optimistic man and I believe that we will be able to finish implementing an Extended Fund Programme, which will be a larger and longer-lasting program,” the minister stated at a press conference in Islamabad.

After the meeting today, Malik explained to me that the objective of pushing through an unpopular and tough budget was to use it as a stepping stone for an IMF programme. He also stated that the lender was pleased with the revenue measures taken as a result of their discussions today.

Having completed all major prior actions, including the budget, there are no major issues left to address now that all prior actions, including the budget, have been completed.

There is a possibility that the budget will be approved by the IMF, but it could also fuel public anger, say analysts.

In Malik’s opinion, the IMF’s program is all about stabilising the local economy, since the budget reforms are burdensome for the local economy.

According to Saib Sherani, an economist and CEO of Macro Economic Insights, a quick agreement with the IMF was needed in order to prevent the country’s foreign exchange reserves and currency from being stressed as its debt payments get older, and the effects of the unwinding of capital and import controls that were in place earlier would have had an adverse impact on the country’s currency.

According to him, if it takes longer, then the central bank may have to temporarily reintroduce capital and import controls as a result of the delays. A period of uncertainty is likely to erupt, and one casualty, which is likely to be the rally in equities, is likely to be the economic recovery.

Timenews1 provided that news.

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