ISLAMABAD, PAKISTAN: China agreed to refinance Pakistan with USD 2.3 billion on Thursday, despite the country’s decreasing foreign exchange reserves. “The good news is: The terms and circumstances for Chinese banks refinancing an RMB 15 billion deposit (about US$ 2.3 billion) have been agreed upon. Inflows are scheduled to begin shortly after normal permissions from both sides. This will assist to strengthen our foreign exchange reserves “Ismail sent a tweet.
This event comes as the country’s delayed International Monetary Fund (IMF) programme rests on the government’s ability to achieve a 2.5 percent budgetary adjustment to GDP. Fiscal changes can be made in the upcoming budget by raising income and decreasing expenditures, according to Geo News, citing The News.
To demonstrate its commitment to implementing the’reform agenda,’ the Pakistan government must stop subsidising petrol and diesel prices, hike electricity tariffs by Rs 8 per unit through base tariff increases and fuel price adjustments, and increase gas costs by 20% on average. The Pakistan Finance Minister stated on Tuesday that the staff-level agreement with the IMF was scheduled for mid-June of this year. According to the IMF program’s objectives, the agreement is likewise expected to be reached only after the introduction of the next budget.
The IMF, on the other hand, desired swift fiscal reforms to return the economy to a state of stability. The announcement of the next budget for 2022-23, which will be aligned with IMF policies, will set the stage for a stabilisation path, but here’s the catch-22: the government will have to make tough decisions rather than doling out resources to gain political support, according to sources cited by Geo News. In such a case, the IMF proposes increasing the Federal Board of Revenue’s tax collection target for the following fiscal year to PKR 7.5 trillion while reducing development funding and subsidies.
Although the government intended to retain petroleum product prices at their current levels until June 1, 2022, the burden will have to be passed on to consumers following the introduction of the budget. According to the most recent estimates, despite hiking petroleum product prices by PKR 30 per litre, the subsidy on fuel remained at PKR 39 per litre, up from PKR 17 per litre when the prices were raised on May 27.