The International Monetary Fund (IMF) on Tuesday conditionally agreed to Pakistan’s circular debt management plan.
According to sources, the authority expressed conditional readiness to approve Pakistan’s Circular Debt Management Plan, linking its approval to the implementation of a debt servicing surcharge.
Sources revealed that the IMF has demanded that Pakistan impose a DSS of Rs 2.8 per unit on consumers to reduce the circular debt. The government has proposed a plan to reduce the circular debt by Rs 1,250 billion.
To eliminate the circular debt, the government plans to borrow Rs 1,250 billion from banks at an interest rate of 10.8%. The loan will be repaid by imposing a surcharge on consumers, sources added.
Moreover, the IMF has provided Pakistani authorities with the draft of the Memorandum of Economic and Financial Policies (MEFP) to help build consensus.
This move could pave the way for reaching a staff-level agreement under the $7 billion Extended Fund Facility (EFF).
According to sources, some relief measures are being considered for the construction and real estate sectors. However, it is yet to be decided whether these relief measures will be implemented immediately or included in the upcoming budget.
Earlier, the IMF urged Pakistan’s Special Investment Facilitation Council (SIFC) to refrain from granting tax exemptions to international investment projects, including the Chaghi-Gwadar railway track project worth $2 billion.
According to sources, the IMF delegation maintained that tax exemptions for international investments would hinder the country’s revenue generation.
The government had requested Gulf countries to invest in the Chaghi-Gwadar railway track project, but the IMF has refused to grant tax exemptions to the SIFC for international investments. The SIFC has been providing a platform for investment and facilitating the transportation of minerals from Reko Diq to Gwadar through a new railway line.
Briefing the IMF delegation, officials stated that a platform is being provided to facilitate investment, and a new railway line will be constructed to transport minerals from Reko Diq to Gwadar.
