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Saturday, February 17, 2024

Shaukat Tarin reveals IMF and government deal

In a press conference, Shaukat Tarin highlighted that the IMF demanded to match policy rate with headline inflation rather than the core inflation during PTI government

On Wednesday, former Finance Minister Shaukat Tarin highlighted that the International Monetary Fund’s (IMF) showed clemency towards the current government. During PTI regime, IMF demanded to match policy rate with headline inflation rather than the core inflation.

While addressing a press conference, he mentioned that IMF adopted a strict approach during settlement negotiations with PTI.

“Today, headline inflation is 25-30%, and the IMF will not demand from the current government to match it with policy rates,” he said. “People will now recognize who was behind the PTI government’s ouster from the center.”

He emphasized that the current government should have approached Russia for cheap oil imports as soon as it took office. Following the acquisition of cheap Russian oil, the government should have installed a targeted subsidy and reduced the Public Sector Development Program (PSDP), according to the former minister.

Read more: Pakistan meets IMF to get funds with toughest conditions

Tarin remarked that the PTI government initiated the process and even wrote a letter to Moscow in hopes of securing an oil deal. However, the current government has postponed the decision on petroleum product prices entirely.

The current government’s announcement that the current account deficit would be $22 billion alarmed markets and banks, and in response, the State Bank of Pakistan (SBP) raised interest rates.

He said, “When interest rates rose, the Pakistan Stock Exchange fell, and the expectation of a $22 billion current account deficit signaled a shortfall of dollars in the market, putting pressure on the rupee.”

The same remarks, he claimed, prompted the IMF to halt a $6 billion program.

On the contrary, he claimed that the country’s electricity load shedding was due to a delay in the import of oil and gas. “After only six weeks in office, the government delivered its first mini-budget, raising petrol prices by Rs85 per litre in just two weeks.”

Furthermore, the finance minister stated that gas prices will rise by 45 percent starting from July 1. Tarin mentioned that the Sensitive Price Indicator (SPI) had risen to 28% and that prices of essential goods had risen by 40-50%.

He described the budget for 2022-23 as provisional, claiming that the country would fail to attain 5% growth because 30-35 percent inflation would prevent the industrial, agricultural, and service sectors from expanding.

He also pointed out that the governments of Sindh and Punjab are in deficit, but the federal government anticipates provincial earnings from the two provinces to help the center. “At the moment, the leadership is in talks with the IMF, and it has set a fixed revenue budget of Rs7.5 trillion.” We would have stayed with Rs8 trillion,” he said.

He bemoaned the reversal of the PTI government’s progressive taxation policies. He continued by saying that to safeguard retailers, the leadership has scrapped the ID card requisite. The government is protecting retailers, which will increase the burden on taxpayers.

He believed that the taxation mechanism should be progressive. Furthermore, he expressed regret that the government would raise the petroleum development levy to a historic high of Rs50 per liter, claiming that this would raise inflation and reduce exports and foreign direct investment.