File photo of the Adviser to the P.M. on Finance Shaukat Tarin
Adviser to the P.M. on Finance says electricity tariffs must increase; State Bank made autonomous and tax exemptions withdrawn
Adviser to the P.M. on Finance Shaukat Tarin on Tuesday said that Pakistan must fulfill five demands of the International Monetary Fund (IMF) before the lender agrees to resume its $6 billion Extended Fund Facility (EFF).
Speaking with media in Islamabad after addressing the Corporate Philanthropy Awards 2019-20, he said that Islamabad must hike electricity tariffs; withdraw tax exemptions; and place before Parliament the State Bank of Pakistan (SBP) Amendment Bill 2021. In addition, he said, two other “minor” actions needed to be fulfilled. Once these demands had been met, he said, the IMF would call a board meeting to approve the revival of the EFF that has been suspended since April.
Refusing to provide a date for resumption of the IMF bailout—Tarin has been claiming it is coming “very soon” since last month—he reiterated that the deal was “done.”
Referring to the demand for tariff adjustment, he claimed it had been “partially” met with the recent Rs. 1.39/unit increase; the next tariff increase would take place around February or March 2022. Of the bills to grant autonomy to the SBP and end tax exemptions, he said both were being prepared by the Law Ministry and would soon be placed before Parliament. To a question, he claimed that the IMF board could be called to approve the resumption of the EFF as soon as Islamabad completed all prior actions.
According to sources familiar with the IMF’s demands, the “minor” actions required relate to an increase in the monetary policy and adjustment to the exchange rate that could further devalue the rupee. However, Tarin claimed that the rupee would start to appreciate once again once the IMF deal had been finalized.
Responding to a question, the adviser said combining various federal and provincial government entities’ accounts—worth trillions of rupees—into a single treasury account was also a condition of the IMF program, but this was not a “prior action” and would be gradually implemented. To another question, he said the government had shared its Circular Debt Management Plan with the IMF, claiming it would reduce circular debt Rs. 300-400 billion. He said the companies did not announce their dividends, so the government had decided to utilize the dividend amount of six to seven giants of public sector companies to pay off the circular debt.
Tarin also said that Pakistan’s exports were largely dependent upon the U.S. and the European Union, adding that due to fears over a cessation of the country’s GSP+ status in the European bloc, there was a need to diversify export destinations.