Pakistan to ‘complete IMF programme’
- Premier directs economic team to increase power generation.
- PM Shehbaz emphasises need to reduce circular debt.
- Differences between IMF and Pakistan still persist.
Amid uncertainty over the delay in the 9th review of the International Monetary Fund (IMF), Prime Minister Shehbaz Sharif Wednesday rejected all news reports, saying that Pakistan would complete the programme.
Pakistan and the IMF have been holding talks virtually but differences still persist over tax collection targets, and non-starter energy reforms including hiking of gas tariff, rising circular debt, and expenditure overrun, making consensus harder to strike on a staff-level agreement in the context of the 9th review under $7 billion Extended Fund Facility (EFF).
PM Shehbaz, during an important meeting held on the economic situation, directed the authorities concerned to provide support to the exporters in order to increase exports and manage twin deficits.
The premier said when the Pakistan Democratic Movement-led government came into power in April after ousting then-prime minister Imran Khan through a no-confidence motion, the economy was struggling miserably.
“We stabilised the economy by working hard,” he said, directing the economic team to take measures to complete the IMF programme and manage the rising current account deficit.
In line with the concerns raised by the Washington-based lender, PM Shehbaz gave directives that the relevant ministries should work on energy policies. He added that power generation should be increased while the circular debt should be brought down.
It should be noted that the IMF had asked Pakistan for hiking the gas tariff because the government kept the gas prices unchanged which resulted in increasing the circular debt of the gas sector.
Although the government made plans for improving the gas sector no progress was witnessed in the power sector.
The monster of circular debt in the power sector went up to Rs2.4 trillion and all targets agreed with the IMF for reducing it on a monthly and quarterly basis could not be achieved.
The subsidy on tube-wells alone would cause an increase of Rs200 billion in the accumulated circular debt in the ongoing financial year.
Gold rally in Pakistan as rupee extends losses
Gold prices climbed on Friday on the back of a sliding rupee, as markets remained focused on the State Bank of Pakistan’s (SBP) interest rate strategy.
According to the data released by All-Pakistan Sarafa Gems and Jewellers Association (APSGJA), the price of gold (24 carats) rose by Rs700 per tola and Rs601 per 10 grams to settle at Rs208,700 and Rs178,927.
Exchange loss likely to deprive masses benefit in petrol price cut
- Govt to announce petrol price today for next fortnight.
- Exchange loss adjustment to rob consumers of petrol price cut.
- Current exchange rate is heavily tilted in favour of the dollar.
KARACHI: Due to a sharp rise in the value of the dollar in the last two weeks, the masses may not get any benefit in the prices of petroleum products, according to a The News report.
The report said that the price of diesel is reflecting an Rs34/litre decrease for the next fortnight. The government is scheduled to review the price of petroleum products today.
The international price of crude oil has come down, which can be translated into a major cut in domestic prices of petroleum products, but only if the government passes on the full impact to the end consumers.
However, sources in the oil sector believe that the government would not pass on the full impact of the reduction in the international prices on exchange losses accumulated over the months, which had put the oil sector in a financial crunch.
The government may be deterred to pass on the impact to end consumers, as the oil sector would be in deep financial trouble if their losses are not adjusted on account of sharp exchange rate fluctuations in the past many months.
Oil sector sources told the publication that the ex-refinery price of diesel is showing Rs34/litre decrease for the next fortnight. However, the exchange losses on diesel go over Rs100/litre, which needs to be adjusted.
Sources said that the government may pass on some relief by cutting the diesel price by Rs15 to 20 per litre for the consumers while adjusting the remaining exchange losses.
Sources, however, felt that this was a ripe time for the government to adjust whatever remained of exchange loss adjustment.
The fall in crude prices gave the government enough fiscal space to accommodate the oil companies, which have been facing financial problems as they were not receiving the full amount of exchange losses.
As far as petrol is concerned, its price is showing Rs13-14 per litre decline on the basis of its ex-refinery price in the next fortnight.
Again the exchange loss adjustment may deprive the consumers of the benefit of price reduction and the government may only pass on Rs4-5 relief while adjusting the remaining amount.
The present exchange rate is heavily tilted in the favour of the dollar. It is a huge hurdle for the government, in terms of reducing the prices of petroleum products in the domestic market.
According to the oil industry estimates, the average exchange rate calculated for the next fortnight is Rs283 to determine the price of the ex-refinery.
Pakistan’s oil sector has repeatedly requested the government in many letters to resolve the exchange losses issue, with few players in the industry pleading to make it more fair and transparent.
Petrol relief package gives IMF ‘excuse’ to delay agreement
- IMF verifying from KSA, UAE on financing before staff-level deal.
- Fund rejects initial petrol subsidy plan.
- Asks Pakistan to provide more details about fuel relief package.
ISLAMABAD: The International Monetary Fund (IMF) has asked the Pakistani authorities to provide more details about the petrol relief package causing more delay in the signing of the staff-level agreement, The News reported Thursday.
The half-baked cross-fuel subsidy proposal by the petroleum ministry has failed to convince the Fund, which has rejected the initial plan arguing that more details are required to verify its sustainability.
The question arises, according to the publication, as to why the PM Office and Ministry of Petroleum announced the plan without taking the IMF review mission into confidence prior to its announcement.
The report stated that the Ministry of Finance has distanced itself from the plan proposed at a time when Pakistan and the lender are inching towards signing the agreement.
The Ministry of Petroleum has now been advised to withdraw the proposal at this stage and iron out the policy details with the Ministry of Finance and then take the IMF into confidence in the next review.
Meanwhile, Minister of State for Finance Dr Aisha Ghaus Pasha has termed the petrol subsidy plan ‘not workable’.
Speaking to journalists after attending the Senate Standing Committee on Finance meeting, Aisha Ghaus Pasha said there is no suggestion of subsidy on petroleum products and the Petroleum Division had suggested cross-subsidies on petroleum products, which is not workable.
She said that the parleys with the IMF were continuing and now the only outstanding issue remained of the lender getting confirmation on external financing from bilateral countries, including Saudi Arabia and the UAE, which was underway.
“There are indications that financial assistance is expected from bilateral friends very soon, that will help finalise the staff-level agreement with the IMF,” she said.
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