Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh has announced that technical teams of the government and the International Monetary Fund have reached an agreement on a bailout package for Pakistan.
He said that after months of discussions and negotiations, a staff-level agreement had been reached between Pakistan and the IMF. Dr Shaikh revealed that Pakistan would receive $6 billion worth of assistance under the IMF programme over a period of three years. According to media report, Finance adviser hints at raising prices in some areas to recover costs
He said the staff-level agreement, which must still be approved by the IMF board of directors in Washington, would show that effective reforms were underway in Pakistan. Dr Shaikh said IMF is an international institution whose primary job is to assist member countries who are in an economic difficulty. He said the government could not have bridged the financing gap of $12 billion on its own that he said was created by a weak economy. He also revealed that besides the IMF assistance, Pakistan will also receive additional funds worth nearly $2-3 billion from institutions like the World Bank and Asian Development Bank.
While talking about the conditions that Pakistan has agreed to as part of the agreement, Dr Shaikh said there were many things desired by the Fund that the government already saw as being in the country’s interest; they include aligning expenditure with resources, improve the functioning of loss-making state-owned enterprises, curtail the subsidies available to the wealthy classes and tax the rich segments. Experts believe that agreement with IMF will provide benefits to the ailing economy and it also has some negative impacts. It will provide stability in the economy by ending uncertainty. The World Bank, Asian Development Bank and other international financial institutions will resume their funding to Pakistan. Pakistan is already planning to issue bonds in international markets, after IMF program Pakistan will be able to get better response in this regard. It is good that additional 80 billion rupees will be allocated for social safety program because it may minimize some burden on poor people. On the other hand it is being expected that in inflation will rise in coming days as government has made commitment with IMF to increase taxes and energy prices. In these circumstances, it will be great challenge for the government to implement reform package under IMF program and to provide relief to people.