ISLAMABAD: Amid hopes of reaching an agreement with the International Monetary Fund (IMF) on a basic economic policy framework programme, Pakistan is likely to receive the first tranche of $1 billion under the balance of payments support from the Kingdom of Saudi Arabia within the next couple of days, boosting the country’s plummeting foreign currency reserves.

The money would hopefully reach the State Bank of Pakistan (SBP) by Monday, Finance Minister Asad Umar told Dawn in an exclusive talk. He said, “My Saudi Arabian counterpart has given me an assurance in this regard.”

The second and third tranche will be received over the next two months.

Finance minister optimistic about reaching basic agreement with IMF by 20th

Last month Saudi Arabia had agreed to provide a $6bn package to Pakistan to support its ailing economy. The package included $3bn balance of payments support and another $3bn in deferred payments on oil import.

Mr Umar said the facility of deferred payment on oil import would mature by next month. However, the finance minister, who sounded very confident that an immediate balance of payments crisis had been overcome with the help of bilateral assistance from Saudi Arabia and China, did not give any figure. “This will be an unprecedented help from China,” the minister said, adding that he had committed not to disclose details before it was finalised. “I will not divulge the details at this moment,” he reiterated.

He claimed that the only reason of going to the IMF was to accelerate the pace of economic growth and not to seek loan to fill any gap. He explained that he was not negotiating terms of a loan but of a ‘broader economic reforms package’.

The available IMF funding quota for Pakistan is approximately $6-6.5 billion.

The government had taken several steps including reduction in expenditures to bring drastic cut in the current account deficit. “We will reduce the current account deficit to $12bn by the end of June 2019, almost $7bn reduction,” the minister declared, explaining that this was the government target for the first year.

He said the IMF package would play a small part in filling the balance of payments gap directly though it would pave the way for getting loans from multilateral donors and commercial creditors.

Pakistan was negotiating the basic economic policy framework agreement with the IMF, he said. “This will be our basic achievement which we are hoping to reach by Nov 20,” he said, adding that details could be negotiated later.

He said there was no difference of opinion about putting economy on the right course with the IMF support. The only issues that could come up during the talks were related to ‘pace of adjustments’ and ‘pace of burden’.

“Our direction is very clear that we will place burden only on higher income individuals,” he said. It was common understanding that IMF would ask for more revenue to reduce fiscal deficit, reducing line losses in gas and power sector and increase it further, he said. But it would be the government decision whether to pass on the burden, he added.

“I will not hide behind IMF if I believe that certain measures are required to fix economic issues,” he said, claiming that both sides had already reached an agreement on basic facts and also exchanged the frameworks.

On Monday, the minister said that he would be in a better position to see whether there was a larger agreement or gaps still existed in the negotiations. He clarified that it would be the government decision how to reduce the fiscal deficit.

Mr Umar admitted that increase in revenue was one of the major areas of discussion. He made it clear that the shape and quantum of total additional revenue would be decided by the government and not the IMF.

About privatisation, he said Pakistan and IMF had no differences on structural reforms, as his government had identified seven companies for privatisation out of 50 to 60 state-owned enterprises placed on active privatisation list for many years. Even if LNG company was privatised, its cumulative impact would be more than the whole five years privatisation progamme of the previous government, he claimed.

The placement of 50 to 60 companies on active privatisation plan was to make these entities redundant, he said, adding that the PTI government had already declared that strategic assets such as Pakistan Steel Mills, Pakistan Railways and Pakistan International Airlines would not be privatised but would be restructured on professional lines. He added that the government had given a 45-day ultimatum to the PSM management to come up with a comprehensive plan with regard to running the mills at its full capacity.

Published in Dawn, November 18th, 2018