This was revealed by a senior Finance Ministry official, a participant of the negotiations with IMF, on condition of strict anonymity.
The impasse is not on the amount of the package itself, he added, but on the conditions that are not acceptable to the government. No administration can possibly accept a free float, especially not given the current state of the economy, as it would lead to hyper inflation in the country; nor accept a notification of an additional across the board 22 percent increase in electricity that would not only have serious implications on the disposable income of the poor but also seriously raise input costs making Pakistani products even more uncompetitive in the international market; and neither is the government in a position to release CPEC details without explicit Chinese approval with China identified as the third major ''friendly'' country willing to support the country deal with the prevailing economic crisis, he further clarified.
However, Advisor & Spokesman Ministry of Finance Dr Khaqan Najeeb stated, "The issue of exchange rate never came under discussion during recent talks with the IMF. The government has given no commitment on the exchange rate target." He further stated that Pakistan and IMF continue to remain engaged on all issues and the discussions are focused on what measures to take to put the economy on the path of fiscal consolidation, macroeconomic stabilization and structural reforms. Najeeb added that the government has shared CPEC project details with the IMF, a claim supported by Asad Umer recently, and added that Pakistan is committed to strengthen its revenue collection and this is not because of IMF as broadening of tax base has always been on top of this administration''s agenda.
This statement was echoed by the IMF resident representative Teresa Daban in response to Business Recorder query and she wrote "at this stage there is a strong understanding between the Pakistani authorities and Fund staff on the diagnostic of Pakistan''s macroeconomic challenges, the need for adjustment policies, and the goals to be achieved."
The understanding is for the need to implement "good" polices, including a revenue-based medium-term fiscal consolidation, monetary policy tightening, transition towards a flexible exchange rate regime, with a strong, independent and accountable SBP, the reduction of the losses of public enterprises (including circular debt), and the strengthening of the social safety net to protect the most vulnerable from the adjustment.
Against this background, dialogue and discussions continue. Main items for discussions are the composition, sequencing, and prioritization. The objective continues to be the achievement of understanding on these items, and on a set of "good" policies that could be the base of a staff-level agreement".
Clearly both Najeeb and Daban''s intent is not to scuttle the talks that are expected to resume in February next year.
The World Bank local representative stated, "We have not yet made any decision on Development Project Financing. It will be dependent on a sound and adequate macro economic framework and the ambition of the policy reform agenda. An IMF letter of assessment will inform our decision making.
"We have not made any determination yet on the volume of financing as it depends on the ambition of the reform agenda. We will consider instruments including guarantees for Pakistan to access markets and direct budget support to boost human capital outcomes in the country".
Business Recorder has calculated that the total policy loans disbursed by World Bank and Asian Development Bank to Pakistan were on average around one billion dollars till 2016 and subsequent to the end of the previous Fund package, Extended Fund Facility, in September 2016 no policy loan by either of these two multilaterals has been disbursed to Pakistan.
On 18 December, 2018, Finance Minister Asad Umar informed a Senate Standing Committee on Finance that the Memorandum of Economic and Fiscal Policies (MEFP) for a new package had been sent to the IMF but the country is not in an urgent need for a Fund bailout package as the financing gap of $12 billion for the ongoing fiscal year had been managed due to assistance from the friendly countries including Saudi Arabia, UAE and China. There is a difference of opinion as to how much of the 18 billion dollar current account deficit needs to be met on an emergent basis.
Pakistan has reportedly offered a rate of 150 rupees to the dollar, unconfirmed by official sources, by the end of the fiscal year and to-date has refused to raise electricity rates by a further 11 percent and has informed the IMF in no uncertain terms that a further raise of the same amount before August-September 2019 may be politically suicidal. Additionally the government has refused to raise rates for those who consume up to 200 monthly units. However, the government has committed to the IMF that it would put in place measures to reduce the flow of circular debt by July 1, 2019.