“I think it will be over $6 billion,” the Revenue Minister said of the size of the package.
KARACHI: The Pakistan Muslim League-Nawaz (PML-N)-led coalition government hopes to secure an International Monetary Fund (IMF) bailout of over $6 billion “within the next three to four weeks” after meeting all the IMF’s annual budgetary requirements, Minister of State for Finance, Revenue and Power Ali Pervaiz Malik said on Wednesday.
The federal government on June 12 presented a draft federal budget with tough revenue targets to help the IMF approve a loan under the Extended Fund Facility (EFF) to avoid a further economic collapse amid growing domestic anger over new tax measures.
In its budget proposals, the government seeks to raise revenue by raising taxes on already overburdened salaried workers, bringing exporters into the regular tax system, raising petroleum duty to 70 rupees and imposing new taxes on the real estate sector.
“We hope to complete this (IMF) process in the next three to four weeks,” Malik said. ReutersThe aim is to reach a staff-level agreement before the IMF Executive Board recess.
“I think it will be more than $6 billion,” he said of the size of the aid package, but added that the main focus at the moment was on IMF approval.
The IMF did not immediately respond to a request for comment.
Earlier, Finance Minister Muhammad Aurangzeb on Sunday expressed optimism about the country’s chances of securing a new IMF bailout after President Asif Ali Zardari approved a tax-hike budget for the next fiscal year starting July 1.
“The IMF programme is our guarantee in terms of macro stability. We are moving forward with it. It is inevitable. I am very optimistic that we will be able to see a larger and longer-term Extended Fund programme through to completion,” the minister told a press conference in Islamabad.
Malik said the aim of pushing through the tough and unpopular budget proposal in today’s consultations was to use it as a stepping stone to an IMF programme, adding that the IMF was happy with the revenue measures taken in the consultations.
“Budget issues are one of them, but all major steps so far have been achieved so there are no major issues remaining to be addressed,” Malik said.
Analysts say the budget may win IMF approval but could also stoke public anger.
“Obviously, (the budget reforms) will be a burden on the local economy but the IMF program is aimed at stabilisation,” Malik said.
Saqib Sherani, an economist and head of the private firm Macro Economic Insights, said a quick agreement with the IMF was needed to avoid pressure on Pakistan’s foreign exchange reserves and currency, given Pakistan’s looming debt repayment deadlines and the impact of lifting previously applied capital and import controls.
“If it takes longer, the central bank may be forced to temporarily reinstate import and capital controls,” he said. “We will continue to have uncertain times, but one of the costs will be higher stock prices.”