IMF programme folded into tough prior actions

ISLAMABAD: The delay in approaching the IMF has made it hard for the policy makers to negotiate an implementable programme with the IMF.

All major actions including additional taxation measures of around 700 billion, allowing exchange rate movement, and hiking electricity tariff and policy rate are part of prior actions.

When the Finance Ministry spokesman was contacted Sunday night, he did not respond when asked to comment on prior actions for getting approval of the IMF’s executive board after implementing all prior actions.

Top official sources told The News Sunday that now the Pakistani authorities had approached different international capitals, especially Washington and other western capitals as well as Beijing, to help Islamabad in finalising an implementable programme with the IMF.

In her standard reply, the IMF’s Resident Representative in Pakistan Teresa Daban Sanchez said that during the course of negotiations there would be no media interaction whenever asked about it.

The IMF programme folded into toughest conditions, which might cause the country to slip into the “one or two tranche country” category after failing to deliver on the Fund’s conditions.

A top official involved in negotiations with the IMF team told The News that the Fund staff was lenient in first two to three days talks after which they came up with so much harsh conditions that seemed totally unacceptable on many fronts.

These include fiscal adjustments of 2.6 percent of GDP or Rs1,120 billion through cut in expenditures and generation of revenue in the upcoming budget. This means additional revenue measures of Rs600 to Rs700 billion are required to ensure such fiscal adjustments.

“The IMF demands raise in discount rate by 200 basis points upfront as well as further devaluation of 20 to 30 percent,” the official said.