Pakistan submits economic reform plan for IMF bailout

ISLAMABAD: After months of indecision on whether to go ahead with an IMF bailout programme, Pakistan has formally submitted a blueprint for economic reform to the global lender.

The Memorandum of Economic and Financial Policies (MEFP) submitted to the IMF envisages macroeconomic stabilisation, graduating into a growth strategy over the next three years.

Under the plan, the Imran Khan government plans a fiscal adjustment of about 2.5% of GDP in three years - almost the same as the last IMF programme ending September 2016 - to bring down the fiscal deficit to about 4% at the end of the 36-month programme.

Confirming the development, finance minister Asad Umar said the blueprint is under discussion, but declined to give details. “They (IMF) may have something to add and come back to us,” he said.

This time, the programme implementation would be frontloaded compared to the relatively balanced implementation schedule of the last programme.

“Most of the pain would be immediate this time in the form of revenue measures and energy pricing,” an official told the media.

The adjustment would entail more than Rs 1 trillion of additional fiscal space with a combination of increased revenues and reduced expenditures.

Under the plan, the government will have to gradually reduce current addition of Rs 30 billion per month in the energy sector’s circular debt and bring it to zero within the first two years of the programme.

It will also have to address the bleeding of other public sector entities, which will be followed by a long route to address the old debt stock of the PSES.

The government is also committing a series of taxation measures to increase revenues while the IMF wants new areas, like agriculture, real estate and others, to be brought under the tax net.