KSA financial assistance has nothing to do with IMF negotiations, says Tarin

Advisor to the Prime Minister on Finance and Revenue Shaukat Tarin has said that the $4.2 billion financial assistance announced by Saudi Arabia for Pakistan has nothing to do with the International Monetary Fund (IMF) negotiations.

These remarks were made by Tarin during a press conference on Wednesday alongside Minister for Energy Hammad Azhar, following Saudi Arabia’s announcement of providing financial support to Pakistan.

The advisor said that the support package of $4.2 billion is for one year and will prove to be useful especially when the PKR is under pressure and international oil prices are soaring.

Talking about negotiations with IMF, the advisor assured that talks with the international lender are in the final phase and will be successfully concluded in the coming days. “We are in talks on one issue,” said Tarin, without elaborating on the said issue.

“All issues on the fiscal side have been taken care of. I want to assure that the agreement with IMF will be successfully concluded, and there will be a positive impact on the market,” he added.

Pakistan is in negotiations with the IMF to obtain a $1-billion tranche under the Extended Fund Facility (EFF).

In a late-night development, the Saudi Fund for Development (SFD) announced the issuance of the Royal Directive to deposit an amount worth $3 billion into the central bank of Pakistan, “to help the Pakistani government support its foreign currency reserves and support it in facing the impacts of the coronavirus pandemic,” read a statement by the Saudi Press Agency (SPA).

In addition, the SFD said that the royal directive was also issued to finance the oil derivatives trade with a total amount of $1.2 billion throughout the year.

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“It pointed out that these royal directives confirm the Kingdom of Saudi Arabia (KSA)'s ongoing stance in supporting the economy of the sisterly Republic of Pakistan,” the statement read.

The announcement came just hours after PM Imran Khan returned from his three-day visit to KSA, to attend the launch of the Middle East Green Initiative (MGI) Summit held in Riyadh.

Meanwhile, addressing the presser, Azhar informed about the measures taken by the government to ease the effect of rising inflation.

“The entire world is going through a commodity cycle, which means that during the Covid-19 pandemic, major economies of the world announced a stimulus package to boost their economy. Today we see that the rates of all goods from food items to energy commodities have jumped up by threefold in the international market,” said Azhar.

This has affected all countries including rich and poor, said the minister for energy.

“POL rates in Pakistan, excluding those in oil-producing countries, are still among the cheapest in the world,” said Azhar. “Similarly, gas rates in Pakistan have not increased since 2019, whereas, in Europe, gas rates have jumped 5-10% in this winter season alone.”

Azhar further said that the government has also kept urea prices low to Rs 1,700-1,800 as compared to Rs7,000 in international markets. “We have given tax concessions worth Rs450 billion from August 2020 in sales tax and PDL, which has an impact as we are facing fiscal pressures,” he said.

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Hammad, however, expressed optimism that in the coming six months, the global commodity cycle would weaken, and the rates of all commodities including food and energy would come down in the international markets, which would be translated locally.

On Financial Action Task Force (FATF), Azhar said that we have made ‘very good progress' on two action plans. “Pakistan has completed 26 of the 27 points in the FATF 27-point action plan. This time around majority of countries were of the view that Pakistan has also met the 27th condition. However, some countries said that Pakistan needs to make more progress and provide more information.”

Hammad said that the government is confident to meet the 27th point by the upcoming FATF cycle.