ISLAMABAD: The International Monetary Fund (IMF) has insisted Pakistan to tighten its monetary policy.
A virtual meeting was held between Pakistan and the IMF yesterday in which efforts were made by Pakistan to complete the staff level agreement.
Sources say that Pakistan is facing constant pressure to take advance measures in time as the IMF has insisted on tightening the monetary policy.
Tightening monetary policy is likely to increase interest rates. The State Bank’s base interest rate is currently 17 percent while the IMF is calling for another 2 percent increase in interest rates.
The IMF is pushing for a tightening of monetary policy based on inflation.
According to the sources, in the meeting, Pakistan informed the IMF about the previous measures. Pakistan also gave a briefing on the financing of friendly countries, in the briefing on refinancing with China, China’s refinancing decision of $700 million was informed.
Sources say that the IMF was also briefed on the financing of $1.2 billion from the United Arab Emirates, in addition to the financing through shares in the stock market of the United Arab Emirates and Qatar.
In the virtual meeting, Pakistan also presented its foreign exchange reserve target strategy till June.
Earlier, the International Monetary Fund (IMF) asked Pakistan to swallow another bitter pill by slapping a power surcharge of approximately Rs3 per unit on consumers for recovery of piled markup on the Power Holding Company.
A government official, on the issue of re-financing of re-financing a loan of $700 million from China Development Bank (CDB), said that they were hopeful that all Chinese matured loans would be re-financed soon.
However, according to sources, two more commercial loans were expected to be re-financed including $500 million and $800 million. So in totality, Pakistan is eyeing to get re-financing of Chinese loans up to $2 billion by the end of February or the first week of March 2023. However, the cash-bleeding power sector still remained a hard nut to crack as so far it has become one of the major stumbling blocs on the way to signing a staff-level agreement with the IMF.
The government will have to make up its mind about slapping another surcharge on the power sector for moving towards striking a much-awaited staff-level agreement (SLA).
