ISLAMABAD - Pakistan and International Monetary Fund (IMF) are inching closer to staff level agreement, which would pave the way for releasing the much needed two loan tranches for Islamabad.

“Pakistan and IMF would reach the staff level agreement in a day or two”, top official of the Ministry of Finance informed The Nation on Wednesday.

He further said that there is no major hurdle as both the sides have resolved all the issues. Pakistan has almost finalized its input on the Memorandum of Economic and Financial Policies (MEFP) for the combined 7th and 8th reviews, which was received from the IMF on June 28 this year. Later, the MEFP would be formally signed by the Finance Minister and the State Bank Governor to enable the IMF staff to circulate Pakistan’s case among the executive board members for approval.

The staff-level agreement will be presented before the IMF Executive Board likely by the end of current month or start of next month for approval after which the tranches will be released. Pakistan would receive two tranches worth of $1.9 billion from the IMF, one as $900 million as the seventh tranche and $1 billion as the eighth tranche.

According to the official, Pakistan has met all prior actions of the IMF. The federal government and provinces had agreed for a memorandum of understanding (MoU) to jointly provide about Rs75 billion cash surplus to the Centre. Earlier, the government had accepted IMF’s demands of eliminating massive subsidy on petroleum products and revising budget estimates.

The government had accepted all demands of the IMF including increasing budget volume, tax collection target, enhancing taxes on petroleum products and salaried class. The government has assured the Fund to impose Rs10 per litre levy on petrol and Rs5 per litre levy on diesel from July this year. Later, the government would gradually enhance the petroleum levy Rs5 per litre every month taking it to Rs50 per litre. Pakistan has increased the proposed tax collection target to Rs7.450 trillion for the next fiscal year from earlier Rs7.004 trillion. The government had enhanced the tax collection by taking additional taxation measures of Rs446 billion. The government had also agreed to impose income tax on those earning Rs50,000 to Rs100,000 per month at the rate of 2.5 per cent and gradually go up for higher earners.

Release of two loan tranches

Islamabad to receive $1.9 billion from the  Fund under 7th and 8th reviews

Govt has already accepted IMF’s demands of eliminating massive subsidy on petroleum products and revising budget estimates

According to the reports, the IMF is demanding for unveiling assets of federal government employees of BPS-17 to BPS-22.

The IMF’s loan programme was stalled in March this year when former Prime Minister Imran Khan had announced massive subsidy on oil and electricity prices and tax amnesty scheme for the industrialists. Pakistan entered the 39-month, $6 billion IMF programme in 2019, but only half of the funds have been disbursed to date as Islamabad has struggled to keep targets on track. Pakistan would receive around one billion dollars from the Fund if the talks remain successful. Pakistan few months back had requested the IMF to increase the size of its $6 billion loan programme by $2 billion and extend it for another year to prop up Pakistan’s balance of payments position and foreign exchange reserves. Pakistan had asked the IMF to enhance its bailout package from the remaining $3 billion to $5 billion.