Pakistan accepts 11 IMF conditions

ISLAMABAD: After minor changes in the 11-point agenda of the International Monetary Fund (IMF), the Pakistan government has agreed to gradually impose the Central Excise Duty (CED) on services and agriculture sectors at the rate of eight to 18 per cent in place of the General Sales Tax (GST), The News learnt here on Saturday.“In view of the IMF demand, the Pakistani currency will also be devalued after slight changes in the discount rate and exchange rate will be decreased officially by six to seven per cent,” an official in the Ministry of Finance disclosed, wishing to remain anonymous.Moreover, the official said the release of 60 per cent funds for the next three quarters of the current financial year, under the Public Sector Development Programme (PSDP), would be reviewed downward to 45 per cent.According to the official, the foreign assistance flow had already declined by 40 per cent because donors had refused to provide funds for new projects at the federal and provincial levels under the PSDP against the ongoing projects funded by the Japan-IBRD, the World Bank, the Islamic Development Bank and the Asian Development Bank.ìThe IMF proposal received by the federal government in the last week of October contained 16 conditions having 180 points that were discussed in four meetings between Pakistani and IMF officials in Dubai,î the official disclosed. Eleven of the 16 conditions have been accepted with slight changes,î he added.The official said that major conditions accepted by the Pakistan government included changes in the Islamic Development Bank loans and differentiation between loans and grants, devaluation of rupee, freezing of non-development expenditure under the defence budget for the last three quarters of the current financial year, non-provision of supplementary grants to government departments, ending subsidy on gas and electricity, 20 per cent reduction in non-development expenditure of civil departments and federal ministries, increase in markup rate of banks and on inter-bank transactions, uniformity in the inter-bank and open market dollar exchange rate and stoppage of government financial intervention in stock markets.ìUnder the conditions accepted by the government, the IMF will be informed at the time of the issuance of credit line by any international financial institution, including the World Bank or immediately after it,î the official said. ìThe matters on which the government and its financial managers have differed with the IMF include release of $1.5 billion to$2 billion for the current financial year under the annual assistance package,î he said.The government wants the IMF to provide $3 billion and another $1.5 billion to $2 billion for adjustment of the loan instalments and maintenance of the balance of payments during the current financial year, said the official.ìBut the IMF wants to release $2 billion for repayments in the first six months after reaching the agreement for saving Pakistan from default and another $500 million for the stability of the national economy,î he said. ìFor this too, the IMF wants increase in the markup rate on the already approved 600 million World Bank loan and grant,î he added.The official opined that despite all the tough conditions, objections and differences, Pakistan would be compelled to seek the IMF assistance package because under the IMF pressure on the Friends of Pakistan, no friendly country has so far agreed to extend loan to Islamabad to meet its repayment obligations. ìTherefore, the government has decided to write a letter of intent to the IMF for assistance,î he said