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Dar blames ‘geopolitics’ for stalled IMF loan
Khaleeq Kiani Published June 16, 2023 Updated about 2 hours ago
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Senator Saleem Mandviwalla chairs a meeting of the Senate’s standing committee on finance on Thursday. — Photo courtesy: Senate website
• Claims foreign powers want to drive Pakistan to default like Sri Lanka, then negotiate
• Says country will meet international obligations, with or without Fund’s help
ISLAMABAD: Finance Minister Ishaq Dar continued with his ‘contradictory’ approach with the IMF, alleging on Thursday that geopolitics was behind a stalled loan programme as global institutions wanted Pakistan to default like Sri Lanka and then enter negotiations, but also insisting that negotiations with the Fund were ongoing and the ninth review would be complete this month.
Testifying before the Senate’s standing committee on finance, he once again stressed that the country would meet its obligations with or without the Fund’s bailout package.
He said no reason had been given by the IMF for the “unnecessary delay” behind the ninth review, which has been pending since November. “IMF or no IMF, Pakistan will not default,” he added.
At the same time, he told journalists after the meeting that “everything is in order” and there was no need to worry as “everything is arranged”.
In fact, he said, the IMF’s ninth review would be completed this month as negotiations were ongoing and not over yet.
Recalling the concerns raised by the credit ratings agency Fitch in late April that how Pakistan could arrange $3.7bn repayments, Mr Dar said: “We did and it’s one-and-a-half months since then.”
In Senate, responding to a query from the panel’s chairman Senator Saleem Mandviwalla, Mr Dar said the IMF’s demand for $6bn guarantee on external resources was unjustified and said the Fund’s delaying plan apparently suggested a political agenda.
He explained that although demands for arranging guarantees for $3bn from friendly bilateral partners — Saudi Arabia and the United Arab Emirates — had been met as committed earlier and the remaining $3bn had been assured by the World Bank and the Asian Development Bank.
The minister said China realised the politics behind the unnecessary delay and its commercial banks agreed to roll over loans to Pakistan.
He argued that the financing gap for the country was projected at $6 billion when the staff-level talks were concluded in February based on a $7bn current account deficit estimated by the IMF.
Now when the deficit had been projected to be $4bn by the end of June, the financing gap also should have been brought down accordingly to $3bn, but the IMF remained stuck to the $6bn financing requirement.
He said the assurance of $3bn was given by the Saudi Arabia and UAE to the Fund besides $400 million World Bank RISE project and $250m by the Asian Infrastructure Investment Bank.
He told the committee that he was not ready to consult the budget with the IMF unless it completed the ninth review and started a discussion on the 10th, but the prime minister intervened a few days before the budget and provided the budget to the IMF.
The finance minister said the government restricted imports to meet external obligations as the country’s foreign exchange reserves were fast depleting and the top priority was to ensure all external payments on time.
He said no payments, including international bonds, were delayed and no foreign payment would be deferred in the months ahead. He said the government was considering lifting restrictions on imports and soon there would be good news, most probably by the end of this month.
He said wheat, fertiliser and hard currency were being smuggled to Afghanistan and this had to be stopped.
Responding to a question, Mr Dar said IMF’s reservations on the current budget might be valid, but the IT, agriculture and Small and Medium Enterprise (SME) sectors were the “drivers of growth” and exemptions given to these sectors were inevitable to ensure the country’s economic growth, which currently stands at 0.29pc. “How can we achieve growth without facilitating certain areas of the economy?” he wondered.
On a suggestion from the committee for giving tax exemption for freelancers to retain their revenue, Mr Dar said freelancers had been allowed to retain 35pc of their revenue and those earning $2,000 were exempted from sales tax and they could also procure duty-free hardware.
He said a return of $2.5bn was expected from the IT industry this year, which would increase to $4.5bn next year. He said exemptions had been given by keeping in view the potential growth of the IT industry.
Senator Irfan Siddiqui apprised the committee about the employees of Radio Pakistan who have not been paid pension and proposed a 5pc radio fee in the annual vehicle registration fee to curb the financial crunch of Radio Pakistan.
He also suggested that a PTV fee, which was being charged to consumers in electricity bills, should be raised from Rs35 to Rs50 and the additional amount should be given to Radio employees.
The Senate committee acknowledged the proposal and referred it to the finance ministry for consideration. However, Senator Saadia Abbasi opposed the proposal.
Meanwhile, Mr Dar on Thursday announced payment of salaries to the government employees for the current month on June 23, enabling them to meet the needs of their families ahead of Eidul Azha, APP reported.
Speaking at the National Assembly, the minister said he had consulted Prime Minister Shehbaz Sharif, who is currently in Azerbaijan on an official visit, in this regard and directed the finance secretary to ensure the salaries are issued.
Published in Dawn, June 16th, 2023
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