Talks with IMF for sixth tranche to start by month-end

ISLAMABAD: Pakistan will start staff-level discussions with the International Monetary Fund by end of the current month for the release of sixth tranche under the $6 billion Extended Fund Facility (EFF), a top official confirmed Dawn on Saturday.

The IMF board has a scheduled a meeting later this month to conduct its sixth review of Pakistan programme. “Our technical team will start virtual discussions with the IMF technical team on Sept 29,” Finance Minister Shaukat Tarin told Dawn.

He went on to say that a list of issues to be discussed was received from the fund. “The final approval will be made in Washington by middle of next month.” Mr Tarin added.

The finance minister will be in Washington for discussions with top IMF officials from Oct 15-17.

Tarin terms dollar’s surge against rupee ‘speculative’

In July 2019, the IMF had approved a 39-month $6bn EFF arrangement for Pakistan to support Islamabad’s economic reform programme.

The government has paused the IMF programme for three months and implements its indigenous policy measures to shore up revenue instead of putting an extra burden on the existing taxpayers.

Mr Tarin said that the revenue performance in the first two months is beyond expectations. “We have proved that our strategy of revenue generation is better than the one prescribed by the fund,” the minister said, adding it would be even better than last year.

The minister said that his policy prescriptions paid dividends. “We are sticking to what we think is right and they are sticking to what they are saying is right,” the minister remarked.

It is worth mentioning that Oct 17 will be the last day of Mr Tarin as federal finance minister representing Pakistan at top-level talks in Washington.

Mr Tarin’s visit will take place at the time of the expiry of the constitutional tenure as federal finance minister as he had been given the portfolio on April 16 this year under Article 91(9) of the Constitution, which empowers the prime minister to appoint a non-elected person as a federal minister for six months.

The government has recently promulgated an ordinance to make it mandatory for an elected person to take oath within 60 days apparently to de-seat self-exiled former finance minister Ishaq Dar to clear the seat for Mr Tarin to elect him as a senator.

Rupee slide

The rupee in recent weeks has weakened sharply against the dollar while the State Bank of Pakistan has yet to intervene to arrest the local currency’s slide.

Asked about the exchange rate volatility, Mr Tarin said that ‘speculators’ created artificial demand. However, he admitted that there is pressure on exchange rate mainly because of speculation over balance of payment issues because of rising import bill. “This is not sustainable and has no base for support,” the minister warned speculators and predicted it will come down.

The rupee has hit a over year’s low, while the the State Bank projects that the current account deficit may widen by 2pc-3pc this fiscal year, against 0.6pc in FY21, on rising imports to support the growth target of 4.8pc.

The minister ruled out the impression created through social media that the rupee will fall to Rs170. “We purchased $450m worth vaccines last month which has driven the country’s import bill,” the minister said.

He said the vaccine purchase is already financed by donor agencies. However, the purchase has pushed up the import bill. He, however, agreed that it will have an impact on the balance of payments, which might go into negative.

The minister said speculators will get temporary benefits because of the pressures on the rupee.

“The State Bank of Pakistan is watching the situation and will intervene when required,” the minister said. However, he did not mention the level when it will make it compulsory for SBP to intervene.

The minister said that the current exchange rate at Rs166 or Rs167 is almost 98pc real exchange rate. He brushed aside the speculation that exchange rate will cross Rs174 or beyond.

On the issue of current account, the minister said that he was constantly reviewing the imports trends. “We will review in case there are unnecessary imports,” the minister hinted at regulatory duties to slow down the imports of luxury items if required.

Besides, the spending on one time import of vaccines the minister said that import bill is also swelled by the import of automobile sector especially CBUs. “We will also look into this issue”, the minister said, adding the automobile sector revives because of slowdown last year mainly hit by the Covid-19.

Published in Dawn, September 12th, 2021

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