According to Syed Naveed Qamar, the Federal Minister for Commerce, Pakistan has taken all necessary measures to unfreeze a $6.5 billion credit line and is expected to reach a staff level agreement (SLA) on Extended Fund Facility (EFF) with the International Monetary Fund (IMF) this week.
Dr Aisha Ghaus Pasha, the Minister of State for Finance, stated that Pakistan and the IMF are close to reaching an SLA, but that basic structural reforms are necessary regardless of whether they are part of the IMF program or not.
After the formal announcement, Pakistan will receive a $1.2 billion tranche under the EFF. Qamar stated that the agreement would give investors and creditors confidence in Pakistan’s stabilising economy and that their money would remain protected.
Qamar emphasized that the IMF program is the beginning of other funds flowing in and that increased imports would benefit exports.
However, Pakistan is struggling to meet the tough conditions set by the IMF, such as increasing its low tax base, ending exemptions for the export sector, and raising artificially low energy prices. The country is in dire need of funds as the State Bank of Pakistan-held foreign exchange reserves only cover one month of imports.
To meet IMF conditions, Pakistan has raised taxes, cut subsidies, and devalued its currency. Additionally, a supplementary finance bill was approved that increases sales tax from 17 per cent to 25 per cent on imports and raises general sales tax from 17 per cent to 18 per cent, increasing the burden on already inflation-stricken people.
