Pakistan has prepared a formal application to apply for a stringent International Monetary Fund’s (IMF) loan programme as staff-level agreement is expected to be announced on Friday. The proposed bailout package is expected to range between $7-8 billion.
State Bank of Pakistan Governor Raza Baqir will today send a draft to the IMF representatives.
On Wednesday, both sides agreed that the country would withdraw tax exemptions amounting to Rs700 billion within two years.
The two sides also agreed that Pakistan would increase costs of electricity and gas for the consumers in the next budget. However, reforms in the tax and energy sectors have been outlined in the list of top priorities.
According to sources, the government will have to reduce subsidies and take Rs340 billion from consumers in the energy sector only.
Moreover, the SBP would be able to regulate exchange rates independently, and the rate of US dollar would be set without any pressure from the government.
This implies that the government is expected to allow a significant rupee depreciation and key interest rate hike in 2019.
As a consequence, this would lead to the unfolding of an inflationary budget loaded with taxes on June 11.
Recently, the government has also appointed Shabbar Zaidi, a seasoned tax consultant and former partner of AF Ferguson and Co, as head of other key institution, the Federal Board of Revenue (FBR).