Pakistan to take fiscal measures set by IMF to meet budgetary targets

© Reuters. FILE PHOTO-People wait for their turn to buy low-priced bun-kabab from a shop in Karachi, Pakistan June 10, 2022. REUTERS/Akhtar Soomro

By Asif Shahzad

ISLAMABAD (Reuters) - Pakistan will take fiscal measures set by the International Monetary Fund (IMF) to meet its budgetary targets for the 2022-23 financial year, finance minister Ishaq Dar said on Wednesday.

The measures included reviewing subsidies in the farming and export sectors and shedding energy sector debt, he said.

The minister told a news conference in Islamabad that a "detailed discussion" had taken place with the IMF on the sidelines of a climate conference in Geneva on Monday, where the lender had emphasized a need to take the fiscal measures.

A 9th IMF review to clear the release of the next tranche of funds to Pakistan has been pending since September, as the country faces a severe economic crisis with its central bank foreign reserves falling to a critical level of below $5 billion, which is barely enough for three months of imports.

Pakistan does not have any plans to take over commercial bank's foreign reserves, Dar said in a statement after the news conference, hoping the central bank reserves would improve soon.

"They (IMF) think that we should take some fiscal measures, like if there are some un-budgeted subsidies," he said, adding the latest discussion had narrowed down the issues on the IMF's agenda.

"We will achieve all our budgetary targets," he said.

Dar said that the IMF had taken up the subsidies in the export and farming sectors and the energy reforms, adding: "We will do it but it wouldn't burden any common man, it will be very targeted and categorical."

The minister did not elaborate on whether the subsidies would be cut or withdrawn altogether, saying it would be worked out, adding that the gas sector debt would be reduced from dividends of the companies.

Pakistan's power regulator has already allowed Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company (SSGC) to hike rates up to 75%, which is subject to cabinet approval.

The IMF approved the seventh and eighth reviews of Pakistan's bailout programme, agreed in 2019, together in August to allow the release of more than $1.1 billion.

Pakistan secured a $6 billion bailout in 2019, that was topped up with another $1 billion earlier this year.

With its dwindling reserves, the IMF programme is critical for Pakistan, which urgently need external financing to support an economy that was badly battered by devastating floods in the last monsoon season.

More than $9 billion in pledges were made by the international community for the flood recovery at a climate conference in Geneva on Monday.

Longtime ally Saudi Arabia also said on Tuesday it was considering investing $10 billion in the South Asian nation of 220 million and increasing its deposits in the country's central bank from $3 billion to $5 billion.

(Additional Reporting by Gibran Peshimam; Writing by Sakshi Dayal and Asif Shahzad; Editing by Frank Jack Daniel, Tomasz Janowski and Alex Richardson)