IMF will look upon the final version of budget on July 1st

ISLAMABAD: The International Monetary Fund (IMF) board meeting to be scheduled on July 3.

For accession to a $6 billion bailout facility on Pakistan’s request, IMF will look upon the final budget measures passed by the assembly along with a report on compliance with all prior actions.

The final, approved version of the budget and finance bill are expected to be transmitted to the Fund by Monday.

A senior official of the ministry of finance said that, “Completion of all prior actions has paved the way for the board meeting on third of July. Sharing of budget approved by the parliament was one of the prior actions”.

He added that the budget approval was the final thing for Pakistan to deliver before the IMF meeting. “The latest exchange rate, SBP policy rate, electricity and gas rates and budget approval were the key prior actions”.

Officials said the Memorandum of Economic and Financial Policies (MEFP) had already been transmitted to the IMF in line with the staff level agreement reached on May 12.

The State Bank of Pakistan also will maintain the current gap between its policy rate and the rate of inflation all along. At no time and in any circumstances the difference between policy rate and inflation would not be allowed to fall below 1.5pc. That would mean the policy rate will stay 1.5pc higher than inflation even in extreme circumstances.

“The tax target could be relaxed”, finance minister official said. They said the increase in energy prices – both natural gas (about 25pc) and electricity (about 12pc) – have been approved by the relevant forums and would become legally effective on July 1. Going forward, the government will remain committed to make further tariff adjustments as and when it falls short of meeting its recovery targets.

The government has given a commitment to reduce flow of circular debt to zero by December 31, 2020 and financing old circular debt stock through privatization process and fresh Islamic bonds.

Whereas, Adviser to Prime Minister on Finance Dr Hafeez Shaikh has been saying that approval of IMF package by its board will help revive flow of $2-3bn per annum from the World Bank and the Asian Development Bank, improve Pakistan’s debt situation and send a positive signal to the world markets at the time of launch of international bonds later next year.