Government seeks IMF loan to fight off coronavirus

Pakistan is in negotiation with the International Monetary Fund (IMF) to seek additional $1.4 billion fast-track and upfront payment package, said Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh on Wednesday.
Speaking at a media briefing along with Minister for Economic Affairs Division Hammad Azhar, Adviser to the Prime Minister on Commerce Razak Dawood, Chairperson Federal Board of Revenue (FBR), Special Assistant to Prime Minister on Petroleum Nadeem Babar, and on Information and Broadcasting Firdaus Ashiq Awan, the Adviser on Finance Shaikh added that $1.4 billion being negotiated by Pakistan would not be part of $50 billion package announced by the IMF for corona-affected countries. The adviser initially stated that the terms of conditions of $1.4 billion would be the same of those of existing Extended Fund Facility but later on he stated that it would be concessional loan.
He said that the CVT tax would be removed on capital market.
He further stated that as per commitment with the IMF additional spending on account of coronavirus would not impact the commitment with the fund. Shaikh said that the government had also made progress for fund mobilization and reached an understanding with the World Bank that $1 billion from other projects should be diverted in case of need for the coronavirus.
Pakistan would seek $300 million from the Asian Development Bank (ADB) now, and $900 million in June, to meet the emerging needs of the country, he added. Minister of Economic Affairs Hammad Azhar said that fresh component of the ADB and the World Bank would be $600 million, whereas remaining would be that which was committed to Pakistan but was not disbursed due to slow moving projects.
Now it would be diverted to fast moving projects and commitment would be materialised. "We are monitoring the situation and there are emergency funds with financial institutions, and so far, Pakistan requested to them for COVID-19 funding for support, relief and social economic impact to cater for the vulnerable," he said, adding that in the next stage the government would request them (the IFIs) for economic and budgetary support package.
The minister for information said that the government had not forgotten the media industry and a comprehensive package to cater for their legitimate needs would be unveiled soon, whereas secretary Finance stated that so far no supplementary grant had been issued by the government but as the package was of considerable amount, the supplementary grant and budget would be used to finance it.
However, he said it would be too early to project its impact on the budget deficit. Adviser to the Prime Minister on Commerce Razaq Dawood said that the government would have to handle the industry very sensibly, and all the points would be discussed in the National Coordination Committee (NCC) meeting to address them.
He said that export orders were being cancelled but 25 percent orders were not being cancelled, so that the decision would be taken how to ensure their transportation to the port in the backdrop of the lockdown. The government is focusing on domestic economy and everyone is taken care of in the economic package, he said.
Special Assistant to the Prime Minister on Petroleum Nadeem Babar stated that the government would pick up exchange movement loss of OMCs but not the inventory price subsequent to decrease in petroleum prices, and the summary would be taken to the ECC in this regard. Nadeem Babar said that the government would be looking at OMCs prices holistically as the current situation was expected to continue in the coming six to eight months owing to oversupply of oil situation in the international market.
He said that there would be no late payment surcharge on installment and in case if this issue continued for three months that installments would be divided on nine months. He said that electricity and gas bills would be spread on three months.
Earlier, the adviser on finance, while giving details of the economic package announced by the prime minister on Tuesday, stated that Pakistan's economy was moving towards stabilization as exports were increasing, foreign direct investment recorded $4 billion during the last eight months, and current account deficit was reduced to $3 billion from $20 billion.
He said that Rs 4,000 billion loan was repaid and primary deficit was surplus, which was rare in the country's history, while revenue collection was historic, during the first eight months, with 17 percent growth, and provinces' transfers were also historic.
He added that the State Bank of Pakistan (SBP)'s reserves increased by $5 billion and all these indicators were reflecting positively about Pakistan's economy. He added "now as you all know that COVID-19 issue is expected to have negative impact on the economy and on economies of our neighboring countries and where Pakistan has been exporting goods and its labor were working, were affected, certainly, Pakistan's export and remittances would be affected."
He said that the federal government and the provinces were trying to make a united strategy to fight against the impacts of coronavirus and a package of Rs 1.24 trillion was announced by the prime minister on Tuesday.
The basic components of the package, he said were to protect those labour affected by the virus with Rs 200 billion. He said that the people would be identified with the help of business community, provinces and mechanism to this effect was being finalized to ensure that taxpayers' money reached the deserving people, social security and the EOBI, and the provincial government would be taken on board.
The adviser further stated that for exports industry the government had allocated Rs 100 billion to pay them tax refunds immediately. The SMEs and agriculture would be given Rs 100 billion for increasing their activities, he said adding that for agriculture sector, fertilizer prices would be reduced and it would be subsidized through other measures as well.
He said that small business interest and principle would be deferred and concessional loans should be provinces. The adviser continued that a total 12 million people would be provided monetary support for four months including five million existing, getting monetary support, and seven million additional would be provided Rs 3,000 per month.
He said that Rs 150 billion had been earmarked for monetary support including expansion of Panah Gah (shelter homes) concept. The USC would be provided Rs 50 billion, said the adviser that procurement of 8.2 million tons wheat would transfer Rs 280 billion to the farm sector.
Petroleum products prices have been reduced by Rs 15 per liter and in the coming months this would be reduced further, and would not be increased, and electricity and gas consumers would be allowed to pay bills in installments, and Rs 50 billion are being earmarked for health workers and essential items taxes pulses, ghee and sugar taxes would be reduced to completely eliminated. The NDMA would be provided Rs 50 billion and Rs 100 billion would be earmarked for industry's needs, he added.
He said that the government wanted to provide financial and monetary stimulus and two big decisions were taken in this regard, to reduce policy rate by 2.25 basis points by the State Bank of Pakistan and another big decision was that principle and interest payment, if both are due would be provided three to six months for payment to all businesses.
The PSDP programme would be expedited and should be put on fast track, he said. The adviser said that Ehsaas budget has been earmarked at Rs 192 billion and after exhausting existing allocation and would be provided, whatever would be need to them and government would divert its saving to the expenditure.
There is an agreement between provinces and the federal government to protect the daily wagers and other issue that in case of lockdown, stock market should continue working and truck should reach to the port. He said that Rs 30 billion tax refunds would disbursed to the industry by end of this month and Rs 70 billion by mid of April.