Govt working on plan-B to avoid tough IMF terms

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ISLAMABAD: The economic managers are working on a plan-B to shore up declining foreign exchange reserves and stabilise exchange rate in case conditions for a new bailout package from the International Monetary Fund become too harsh to be acceptable. A senior government official told Dawn on Wednesday that Finance Minister Ishaq Dar had categorically told his economic aides that if the IMF came up with tough conditions the government would not agree to them and would work immediately on plan-B to avoid becoming hostage to external dictates. “We will accept the IMF programme on our terms and conditions and home-grown policies to repay outstanding loan or go for an alternative plan,” he quoted the minister as saying.

“The talk of an alternative plan, instead of the IMF programme, may just be part of bargaining to secure the loan at reasonable terms,” said an official of a lender agency.

Under plan-B, the government will send out at least four different teams abroad. These will include a team to the United States for reconciliation and early disbursement of all outstanding amounts under the coalition support fund while another team will head to major financial capitals to discuss launching of international bonds.

The third team will visit friendly countries to muster support for investments and economic assistance, including oil supplies on deferred payments, cash deposits and participation in privatisation of state-owned entities. Another group will focus on recovering PTCL sale proceeds from UAE’s Etisalat.

The official said the visiting IMF mission had desired a reduction in the public sector development programme (PSDP) and quarterly increases in electricity and gas tariffs to ensure that fiscal deficit did not exceed the target in view of assumptions that revenue targets set by the government were not only ambitious but also not likely to achieve rising tax-to-GDP trajectory in the medium term — the proposed IMF loan disbursement period.

The official said the government had worked out a roadmap for clearing the circular debt by Aug 12 and make an average Rs2.5 per unit increase in electricity rate during the next financial year by protecting the domestic lifeline and low-consumption consumers so that power differential subsidy could be reduced to Rs150 billion from current year’s Rs250bn. But it may find difficult to accept quarterly increases in electricity tariff. Likewise, the government would not like to scale down its PSDP.