There is no Plan B if IMF programme isn’t revived: Aisha

ISLAMABAD: Ruling out the possibility of contemplating upon any other option under Plan B in case of no IMF programme, Minister of State for Finance Dr Aisha Ghaus Pasha said that the Fund did not accept the external financing gap of $4.5 billion assessed by Pakistan. She disclosed that the IMF was still sticking to its projection of a financing gap of $6 billion for the ongoing financial year against Islamabad’s assessment of $4.5 billion on which assurances extended to the IMF by multilateral as well as bilateral creditors.

Dr Aisha Pasha said that the government has shared the budgetary framework for the next fiscal year to satisfy the IMF. However, Pakistan has been waiting for the IMF’s response to share its budgetary framework for the next financial year, recent steps to bridge the gap between interbank and open market rates on exchange rates, and assurances on external financing gaps. A broader agreement on these three major conditions could only pave the way for striking a Staff Level Agreement (SLA).

“Let me say with clarity there were no other options contemplating upon under Plan B in case of no revival of the Fund programme as the government was committed to reviving the IMF program by completing the pending 9th review,” Minister of State for Finance Aisha Ghaus Pasha said while briefing Parliamentarians of National Assembly Standing Committee on Finance here at FBR headquarters on Thursday. The ruling party MNA Ali Pervez Malik inquired about Plan B in case of failing in reviving the IMF program and said that there was talk about a dollar amnesty scheme to improve dollar liquidity. The Minister of State for Finance Dr Aisha Ghaus Pasha stated that there was no Plan B under consideration and assured that they stood committed to reviving the stalled IMF program.

The MOS stated that the Ministry of Finance shared the budgetary framework for the next financial year with the IMF and awaiting their response. The sharing of budgetary numbers is not the part of 9th review as it will be part of the 10th review but the Prime Minister has taken the decision to share the numbers for the revival of the Fund program, she added.

The Deputy Governor State Bank of Pakistan informed the NA panel that the permission granted for credit cards from exchange companies to inter-bank rate would require $70 million to $100 million on average on a monthly basis and recommended the FBR for raising taxes on transactions through credit cards in foreign exchange in the upcoming budget to compress demands for increased foreign exchange requirements.

Earlier, the Chairman of the NA Panel Qaiser Sheikh commended the government and the SBP for taking the required step by allowing payment of credit cards through interbank rate due to which the rupee strengthened in the open market against the US dollar massively on Thursday.

Dr Aisha Ghaus Pasha said that there was a trust deficit, not because of the incumbent regime, but blamed the last PTI-led government for breaching the IMF agreement by doling out un-targeted fuel and electricity subsidies just before leaving the government in the last financial year. She said that the Kingdom of Saudi Arabia had granted assurances of $2 billion in additional deposits, $1 billion from the United Arab Emirates (UAE). The World Bank committed $450 million through the RISE-II program loan and $250 million through Asian Infrastructure Investment Bank (AIIB). The remaining are expected through Geneva pledges in the aftermath of flood assistance. Pakistan, she said, secured financing assurances of $4.5 billion. Initially, it was planned that out of $6 billion, the government would get assurances on $3 billion before signing of Service Level Agreement (SLA). She said that the government paid back $3 billion to commercial banks with the understanding that it would get re-financed these loans once the SLA is done. “We also expect that after the revival of the IMF program, other avenues of securing dollars will also open up” she added.

MNA Ramesh Kumar said that the foreign relations in the wake of tilting from the US to Russia and China side were the main factor behind the delay in the signing of the IMF agreement. The MNA Khalid Magsi stated that there was nothing concrete or certain about the revival of the IMF program.

To another query about deferred payment on clearance of LCs, the Deputy Governor SBP replied that they were scrutinizing data after finding out that this scheme was misused as initially, the SBP had resisted it with fears that it might be misused but on the demands of all stakeholders, they had agreed to allow deferred payment for clearing LCs.

The ongoing IMF programme is going to expire on June 30, 2023, after 28 days so the time is limited for completion of the pending 9th review under the $6.5 billion Extended Fund Facility (EFF). If the staff-level agreement strikes by evolving broader consensus on three contentious issues including external financing, budgetary framework, and sticking to the free market exchange rate then the program will be revived otherwise the program will be met with failure. However, the sources said that Pakistan would be left with no other option but to seek another IMF program next fiscal year keeping in view debt external repayments of $25 billion. It does not include the current account deficit (CAD) and if it is projected in the range of $7-$8 billion for next fiscal year then the total external financing requirements will be stretched up to $32-$33 billion in 2023-24.