Pakistan set to receive $2.77 billion from IMF on Aug 23, says Tarin

Pakistan is set to receive $2.77 billion from the International Monetary Fund (IMF) on August 23, said Finance Minister Shaukat Tarin, confirming earlier reports that the Washington-based lender's increased lending capacity would boost the country's foreign exchange reserves.

Addressing a press conference on Thursday, Tarin said that the funds will directly be sent to the State Bank of Pakistan.

Pakistan's forex reserves set for boost as IMF officially approves increased lending capacity

The IMF's board of governors had earlier approved the increased lending capacity by $650 billion to boost aid for the most vulnerable countries. This is the largest Special Drawing Rights (SDR) allocation in the history of the IMF. The newly-issued SDRs will be allocated to member countries in proportion to their IMF quota, the lender had said.

Emerging and developing nations are to receive around $275 billion in total.

The development was a welcome one for Pakistan that remains under pressure when it comes to external financing requirements. Just this week, reserves held by the country reduced by over $200 million on account of external debt repayments and Covid-19 vaccine procurement.

IMF's EFF

Meanwhile, when asked about the IMF's stringent conditions under the Extended Fund Facility (EFF), which often lead to inflationary pressures on the economy, Tarin said that the lender had determined that an increase in power tariff was the only way to reduce Pakistan's circular debt. However, Tarin said that this approach was "counter intuitive", adding that increasing tariffs will make the industry non-competitive, which would then lead to inflation anyway.

"We may even end up protecting the poor from the tariff but when we increase the tariff on industries, there will be inflation. How will we protect the poor from inflation?" Tarin highlighted.

Discussing Pakistan's income tax targets, Tarin pointed out that the IMF wanted an increase in revenue by Rs150 billion, which is significantly higher than the current figure of Rs113-115 billion.

IMF's new SDR allocation could bolster Pakistan's forex reserves by $2.8 billion: Fitch

"I said that the progressive way of doing it would be to bring those out of the tax net into the fold, rather than putting the burden of additional taxes on to people already paying them," he said.

Tarin also highlighted some of the positive steps taken by the incumbent government as part of the recent budget to boost sustained economic growth in the coming months.