'Pakistan facing exceptionally high risks, needs another IMF programme'

Pakistan needs another IMF programme and support from other multilateral lenders beyond the coming election cycle and the ongoing standby arrangement according to the Washingtonbased global lender reported PTIThe Dawn newspaper reported that the International Monetary Fund said this in a 120page report released on Tuesday which analysed cashstrapped Pakistans macroeconomic outlookThe report is based on the Memorandum of Economic and Fiscal Policies MEFP signed by Finance Minister Ishaq Dar and State Bank Governor Jameel AhmedResolving Pakistans structural challenges including longterm BOP balance of payments pressures will require continued adjustment and creditor support beyond the current programme period the Fund saidThe IMF last week gave a final nod to the USD 3 billion bailout programme for Pakistan to support the governments efforts to stabilise the countrys ailing economy A possible successor arrangement could help anchor the policy adjustment needed to restore Pakistans mediumterm viability and capacity to repay the report saidThe IMF assessment noted that Pakistans economic challenges were complex and multifaceted and risks were exceptionally high Addressing them requires steadfast implementation of agreed policies as well as continued financial support from external partners Consistent and decisive implementation of programme agreements will be essential to reduce risks and maintain macroeconomic stability it saidOn its part according to the report the government has given an international undertaking for immediately notifying about a Rs 5 per unit increase in electricity rates and an over 40 per cent increase in gas rates as the gas sector circular debt is now competing with power sector lossesIt has committed to addressing drivers of circular debt flow in the power sector by notifying recent tariff increases determined by Nepra National Electric Power Regulatory Authority with effect from July 1 and notification of quarterly and monthly tariff adjustments without delays stand ready to take quick additional measures in case set revenue targets are missedThe government has also promised renegotiation of powerpurchase agreements with remaining power producers including Chinese or prolonging their debt servicing tenorsIn the gas sector the government has committed to immediate notification of gas tariff adjustments determined by Ogra besides merging the gas rates for both local and imported natural gas through a weighted average tariff The government has also given an undertaking to ringfence fiscal programme as envisaged in the recent budget and other commitments with the IMFFor this the government will not allow supplementary grants for any additional unbudgeted spending over the parliamentary approved level in the current fiscal year at least until the formation of a new government after the elections except in case of a severe natural disasterThe government has also given a commitment not to launch any new tax amnesties or grant further any new tax exemptions in 202324 including through the budget or statutory regulatory orders without prior assembly approvalThe government has also provided agreements with each province on their commitment to achieving an endFY24 fiscal position consistent with the fiscal years general government primary balance goal of Rs 401 billion and continuing focus on critically urgent energy sector policies including not to introduce any fuel subsidy or crosssubsidy scheme in FY23 and beyondIn addition the government has committed to ensuring monetary and financial stability by returning to a marketdetermined exchange rate lowering inflation toward the target and rebuilding foreign exchange reservesIt said the authorities would refrain from providing guidance or expressing a preference to market participants regarding the exchange rate or regulating demand for forex through either formal or informal administrative actionOnce proper market functioning is restored the authorities have committed to maintaining the average premium between the interbank and open market rates at no more than 125 per cent and no less than minus 125 per cent during any consecutive five business day period and publish daily interbank and open market exchange rates reported DawnThe report shows that would have to go back to the donor next month to seek a fresh loanPTI