ISLAMABAD: Finance Minister Ishaq Dar said on Saturday that the government had entered into a crucial phase of policy-level dialogue with the International Monetary Fund (IMF) to strike a deal for a fresh loan package.
The country’s economic team, headed by Mr Dar, held the first round of talks with IMF officials on Saturday to explain the measures taken in the budget for 2013-14 to revive economic growth and to brief them about the state of economy during the previous financial year.
“We are expecting that Pakistan and the fund’s officials will work out details of the fresh loan on Monday,” the minister told Dawn.
“Whatever the size of the loan package, it will have to be negotiated on Pakistan’s terms,” he said.
Since Pakistan has to repay $3 billion to the IMF during the next financial year, the already dwindling foreign exchange reserves will certainly come under strain.
“We need loans only to repay the previous government’s debt liabilities,” Mr Dar claimed, adding that his economic team was capable of steering the economy out of crisis over the next couple of years.
He said Pakistan had no option but to go for the IMF loan.
He also ruled out reports about a ‘plan B’, saying neither can dollars be printed in Pakistan nor could these be raised from other sources to repay the fund’s instalments which will become due soon.
The minister did not divulge details of his home-grown plan to spur economic growth, but said it would help to run the economy over the next few months.
The IMF team is in Islamabad these days in order to make an assessment of the economy as part of consultations before finalisation of any package. “It is the right of the fund to review Pakistan’s economy” and the job had been done, Ishaq Dar said.
The visit is also a part of the fund’s post-programme monitoring.
Under the new programme, both sides will agree on actionable plans in the next few days which will become a part of the Letter of Intent (LoI).
The IMF’s assessment of Pakistan’s economy will also become a baseline of comfort for multilateral — Asian Development Bank and World Bank — or bilateral donors for giving any loan to the country. A positive assessment will facilitate loans.
The IMF had held consultations with Pakistan in Dubai last week, but the government asked the agency to send its representatives to Islamabad for further negotiations.
Finance Minister Dar said the “Article IV consultation” was over and now the discussion was being held on the new loan package.
The fund’s representatives have held a series of meetings with officials of the Federal Board of Revenue, State Bank, the economic affairs division and the finance division.
“I have full support of and confidence in the competence of my team,” Mr Dar said. However, he added, he would soon appoint a new chairman for the FBR.
“I will bring a competent and honest man to head the country’s top tax machinery,” he said, adding that the contract of the incumbent chairman would end on Sunday.
The finance minister said a task force would be constituted soon to work on a fast track basis for expanding the narrow tax base. “We will increase the tax-to-GDP ratio over the coming years.”
Defending his taxation measures, he said the government had taken bold, politically unpopular decisions to lift the economy from the quagmire it was stuck in.
He said Pakistan needed the loan because of depletion in foreign exchange reserves with the State Bank. The current reserves are not sufficient for meeting the import bill for three months — a minimum requirement for a stable economy.
The country’s average monthly import bill is $4bn.