Minister for Finance Shaukat Tarin on Thursday said that Pakistan is due to receive $2.77 billion from the International Monetary Fund on August 23.
Addressing a press conference to announce the development, Tarin said that the funds will directly be sent to the State Bank of Pakistan, which will help further improve the country’s foreign exchange reserves, and thus have a positive impact on the economy.
Tarin said that the international money lender has released a total of $650 billion for various countries. The amount aims to boost global liquidity amid the coronavirus pandemic.
The finance minister said that it was an “unconditional” allocation from the IMF, which would be used in a productive way.
Tarin said that Pakistan had been already working on reforms to bring stability and sustainability under the IMF programme.
He said that the measures taken by the government have been bearing fruits, as is evident by the growth in revenue collection, which in turn is indicative of economic growth.
The finance minister said that the 2021-22 budget contains a lot of positive steps that the government has taken and so, growth is expected in the coming months.
In response to a question regarding tough conditions imposed by the IMF, he said that in mid March, the global lender had recommended that one way to reduce the ballooning circular debt in the power sector is to increase the tariff.
“Our point of view — and the prime minister supports me in this — is that what will an increase do? Perhaps we will get some extra money. But our industry will become non-competitive,” he said.
“We may even end up protecting the poor from the tariff but when we increase the tariff on industries, there will be inflation. How will we protect the poor from inflation?” Tarin pointed out.
“So this was counter intuitive,” he added.
The finance minister said that the other thing the IMF spoke about was personal income taxes, which are usually to the tune of Rs113-115bn, but the Fund wanted this ramped by Rs150bn more.
“I said that the progressive way of doing it would be to bring those out of the tax net into the fold, rather than putting the burden of additional taxes on to people already paying them,” he said.
It bears mentioning that the Board of Governors of the IMF had approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion (about SDR 456 billion) on August 2, 2021, to boost global liquidity.
The allocation would benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy.
It would particularly help most vulnerable countries struggling to cope with the impact of the COVID-19 crisis.