Pakistan hopeful of IMF deal within days

Reporters also asked Miftah whether the IMF is opposed to the government’s decision to increase the salaries of employees by 15 per cent and tax exemption for those earning less than Rs 1.2m annually….reports Asian Lite News

Pakistan Finance Minister Miftah Ismail expressed hope on Monday that an agreement with the International Monetary Fund (IMF) for the revival of the Extended Fund Facility (EFF) would be reached “within one or two days”, media reports said.

The minister made the remarks while speaking to reporters after a meeting of the Senate standing committee on finance, Dawn reported.

When asked whether Prime Minister Shehbaz Sharif is working on imposing taxes or giving relief to the masses, the minister said: “It depends on the kind of people they are. If they are well-to-do, then taxes will be applicable but the poor will be provided relief.”

Reporters also asked Miftah whether the IMF is opposed to the government’s decision to increase the salaries of employees by 15 per cent and tax exemption for those earning less than Rs 1.2m annually.

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“The IMF has nothing to do with salaries as long as we have the money,” he said, adding that the government will “protect” those earning less than Rs 1.2m annually.

Pakistan signed a 39-month, $6 billion EFF in July 2019, but the IMF stopped the disbursement of about $3 bn when the previous government reneged on its commitments. Currently, Islamabad wants the IMF to not only resume disbursements, but to also expand the size and duration of the programme, Dawn reported.

So far, Pakistan and the IMF have not yet been able to reach close to a staff-level agreement for revival of the loan programme, leaving authorities in a tight spot to bridge the gap and get the updated federal budget for the fiscal year 2022-23 passed by the National Assembly.

PKR on a free fall

In line with market expectations, the Pakistani rupee (PKR) has plunged further and crossed the 210 threshold against the US dollar for the first time in the interbank market on Monday.

The domestic currency was available at 210.19 PKR against the greenback in the interbank market, Geo News reported.

This is the seventh consecutive working day of free-fall in the rupee, losing approximately 6 PKR, or over 3 per cent, to date.

The central bank has seemed helpless in controlling the speculative fall in the rupee as demand for the greenback continues to soar due to quarter-end payments pressure.

“The currency will continue to fall until Pakistan manages to strike a staff-level agreement with the International Monetary Fund (IMF),” AA Commodities Director Adnan Agar said.

The analyst was of the view that the investors’ confidence is completely shattered which can only be strengthened by positive development on the IMF front, reports Geo News.

Agar also mentioned that depleting foreign exchange reserves has triggered panic buying giving speculators a chance to play with the demand and supply of the greenback.

Meanwhile, Exchange Companies Association of Pakistan (ECAP) Chairperson Malik Bostan identified widening trade deficit, political instability, and declining foreign direct investment as major reasons behind the devaluation of the local currency.

“Political stability is key for economic development,” he said, adding that former Prime Minister Imran Khan’s call for another long march may adversely affect the rupee-dollar parity.

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