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Tuesday, July 16, 2024

Last step taken towards the IMF bailout programme

After the recent hike in petroleum development levy (PDL), Pakistan has completed the final prior action for the seventh and eighth reviews combined

After fulfilling various stringent conditions posed by the International Monetary Fund (IMF), after the recent hike in petroleum development levy (PDL), Pakistan has completed the final prior action for the seventh and eighth reviews combined, said by the IMF. It added that the board meeting is tentatively scheduled for late August once adequate financing assurances are confirmed.

On Tuesday, IMF’s Resident Representative for Pakistan Esther Perez Ruiz confirmed that the last prior action has been met.

The statement comes after the government reduced the price of petrol by Rs3.05 per litre on Sunday night, while increasing the price of High-Speed Diesel by Rs8.95 per litre.

Read more: Govt provides relief of Rs 3.05 on petrol

However, the government decided not to pass on the full impact of the decrease in petroleum prices as recommended by the Oil and Gas Regulatory Authority (OGRA), instead raised PDL rates up to Rs10 per litre and dealer margin in a fortnightly review of petroleum prices with effect from August 1, 2022.

The rates of PL on petrol were revised upward from Rs10 to Rs20 per litre. The rate of PL on high speed diesel (HSD) was also increased from Rs5 to Rs10 per litre. Similarly, the PL rate on kerosene oil (SKO) was also increased from Rs5 to Rs10 per litre, while same was the case with light diesel oil (LDO).

IMF staff and the Pakistani authorities have reached a staff level agreement on policies to complete the combined 7th and 8th reviews of Pakistan’s Extended Fund Facility (EFF). The agreement is subject to approval by the IMF’s Executive Board.

Read more: IMF reaches staff-level agreement with Pakistan

IMF team lead, Nathan Porter said in his statement, “subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the programme to about $4.2 billion.”

In addition, in order to support programme implementation and meet the higher financing needs in FY23, as well as catalyze additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR 720 million that will bring the total access under the EFF to about US$7 billion.

However, the IMF was reported last month to be looking to assess Saudi Arabia’s commitment to financing Pakistan before disbursing funds to the country. IMF wants to ensure  that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad does not have a financing gap after the IMF loan.

It is essential for Pakistan to increase the dollar inflows to maintain declining foreign exchange reserves which has greatly affected the currency. Although IMF funding is never released with easy conditions and it increases the debt burden on the country but to cool down the heated economy, all eyes are on the IMF bailout programme.