KARACHI: The government plans to introduce a supplementary budget through a presidential ordinance to implement economic reforms suggested by the International Monetary Fund (IMF) whose executive board will meet in the second week of January to decide the future of a loan program for Pakistan, officials and experts said on Thursday.
Pakistan and the IMF reached a staff level agreement in November on economic policies and reforms required to complete the sixth performance review under the $6 billion bailout package agreed between them in 2019.
The revival of the loan program is subject to the IMF executive board's approval, following the implementation of recommended fiscal and institutional reforms.
“We are going to the IMF board on January 12, 2022,” said Muzzammil Aslam, the finance ministry spokesperson, while talking to Arab News. “The sixth review will be presented to them.”
Aslam added the government was going to the IMF with an understanding it would not be a one-sided decision by the Fund.
The revival of the loan program will get Pakistan $1,059 million. If received, the amount will bring the total disbursements to about $3,027 million and help unlock significant funding from bilateral and multilateral partners, according to the IMF.
The IMF has given a five-point action plan to Pakistan, including the withdrawal of general sales tax, increase in energy tariffs and acceptance of greater autonomy for the country’s central bank.
People familiar with the development said the government was planning to present a supplementary finance bill through a presidential ordinance since it needed time to debate some of the contentious points within the reforms suggested by the IMF.
“Some of the IMF conditions can be fulfilled by introducing a presidential ordinance,” Dr. Vaqar Ahmed, joint executive director at the Sustainable Development Policy Institute (SDPI), told Arab News.
“For example, the revenue collection targets for the first or second quarter can be achieved through additional budgetary measures that can be promulgated through an ordinance,” he explained.
However, he added there were other conditions which could not be met through the ordinance, including amendments to the State Bank of Pakistan Act for which the government was demanding more time.
“At this point, the government wants to demonstrate it is serious about meeting all IMF conditions,” he added. “However, it needs some space while trying to get an approval of the sixth review in the upcoming board meeting.”
Asked about the government’s strategy, the finance ministry spokesperson neither confirmed nor denied that the government was planning to bring the next mini-budget through an ordinance.
Economists estimate the overall impact of the country’s prior action recommended by the Fund for the resumption of the loan program would be Rs600 billion, including Rs350 billion tax exemption withdrawal.
The government will have to pass the supplementary finance bill through a joint sitting of parliament, though it can be politically tricky for Prime Minister Imran Khan’s administration which is already trying to deal with a wobbly economy.
The revival of the IMF program will unleash funding from other bilateral and commercial lenders which can stabilize the country’s forex reserves and exchange rate.