Cold-shouldered by IMF, Pakistan to hike interest rate to 19pc

Staff-level agreement with the Fund further delayed despite Pakistan’s accepting all prior actions n Govt ‘assures’ IMF to raise 2pc interest rate.


ISLAMABAD     -    Pakistan and Interna­tional Monetary Fund (IMF) have yet to reach a staff level agreement despite Islamabad has taken all tough de­cisions including in­creasing power and gas prices massively and imposing new taxa­tion measures worth of Rs170 billion.

Officials of Ministry of Finance were ex­pecting to receive a staff level agreement in the outgoing week after meeting all pri­or actions of the IMF. However, both sides still have not received on the agreement. An official informed that the government has now given assurance to the Fund to increase the interest rate by two percent in order to control the inflation rate in next few days. Currently, the interest rate is 17 percent.

He further said that there are some issues in power sector on which both sides are negotiat­ing. He was optimistic that Pakistan and IMF would reach a staff level agreement next week, which would pave way for releasing much needed loan tranche for the country. Power sec­tor remained one of the major hurdles between two sides in finalizing the agreement.

It is worth mention­ing here that Pakistan and IMF could not reach a staff level agreement as the talks between the two sides ended on Feb­ruary 9 as talks con­tinued for almost ten days. The visiting dele­gation has sought some time for the staff level agreement and set prior actions and advance measures. The IMF had set prior actions including increasing power and gas prices and announcing mini budget to reach on staff level agreement. The govern­ment had already enhanced the power and gas prices.

President Dr Arif Alvi on Thursday has also signed the Finance (Supplementa­ry) Bill, 2023, known as the mini-budget. Pakistan’s for­eign reserves held by the country stood at $8.726 bil­lion as of 17-Feb-2023. The break-up of the foreign re­serves position is as foreign reserves held by the State Bank of Pakistan are $3.258 billion and net foreign re­serves held by commercial bank are $5.468 billion. Pa­kistan is eyeing to get re-fi­nancing of Chinese loans up to $2 billion by the end of February or the first week of March 2023. Two more com­mercial loans were expected to be re-financing including $500 million and $800 million, making total financing at $2 billion from the friendly coun­try. The revival of IMF pro­gramme would pave way for getting loan from other coun­tries and multilateral sources.

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