PTI Islamabad, Pakistan
Dec 07, 2018, 03.46 PM
Cash-strapped Pakistan's quest for a $8 billion IMF bailout package by January 15 may not realise as the global lender wants the government to adopt tougher measures to address the external sector imbalances before sending the country's case to its Executive Board, a media report said Friday.
Pakistan is seeking $8 billion from the International Monetary Fund (IMF) to bail itself out from a severe balance-of-payments crisis that threatens to cripple the country's economy.
The Express Tribune, quoting sources in the ministry of finance, said that the two sides made their first contact on Thursday for the first time since November 20 when they concluded their first round of talks for the bailout package.
Finance Minister Asad Umar and the IMF's Washington-based mission chief Harald Finger made contact through a video link, the report said. The two sides discussed the developments that took place during three weeks.
Talks between Pakistan and the IMF remained inconclusive last month after both sides could not bridge the gulf on issues like the increase in electricity prices, hike in interest rate, rupee devaluation and tax collection targets.
At that time, Pakistani officials had claimed that the staff-level agreement could be reached before Christmas holidays and Pakistan could request the IMF to send its case to the next board meeting, tentatively scheduled for January 15, the report said.
Both the sides showed flexibility and talks on Thursday were held in a more conducive environment than last month, said a senior official of the ministry.
The finance minister informed the IMF mission head about developments on the exchange rate and monetary policy.
The sources said that the IMF welcomed both the developments but urged Pakistan to continue these necessary actions to address the external sector imbalances. The IMF wanted further adjustments in the exchange rate and monetary policy said the sources.
During the video conference, the two sides also discussed the issue of the increase in the electricity prices that remain unimplemented, the report said.
The IMF was demanding 22 per cent further increase in electricity prices to address the issue of the circular debt, the report said.
Meanwhile, Pakistan's debt and liabilities rose to nearly Rs31 trillion at the end of September 2018 with an addition of Rs 984 billion in just three months, another report in the same newspaper said.
The increase comes amid concerns over a rapid rise in the debt burden in the coming months owing to currency depreciation and interest rate hike.
Statistics released by the State Bank of Pakistan (SBP) showed that by the end of the first quarter of the current fiscal year, Pakistan's total debt and liabilities soared to Rs 30.9 trillion. Within a span of just three months, there was an increase of Rs 984 billion, or 3.3 per cent, in the overall debt.
Of the Rs 30.9 trillion, the gross public debt, which is the direct responsibility of the government, stood at Rs 25.8 trillion, the report said.
There was an increase of Rs 839 billion in the gross public debt in three months, which was far higher than the overall budget deficit of Rs 542 billion for the period.
One of the key reasons behind the higher debt was the increase in interest rate and depreciation of the rupee during July-September 2018, the report said.
A single rupee devaluation adds Rs 97 billion to the public debt. Similarly, a 1 per cent increase in interest rate increases the cost of debt servicing by roughly Rs 180 billion. This ultimately increases the borrowing requirements of the finance ministry, it said.
Pakistan has received an aid package of $6 billion from Saudi Arabia and an assurance of financial help from China, both close allies, to tide over the immediate cash crunch.
Pakistan is seeking $8 billion from the International Monetary Fund (IMF) to bail itself out from a severe balance-of-payments crisis.