IMF assures Pakistan to get next tranche in May

ISLAMABAD: The International Monetary Fund (IMF) has assured Pakistan it will approve the release of the next tranche of an $11.3 billion loan at a board meeting on May 3, the Pakistani prime minister's office said on Wednesday.

Prime Minister Yusuf Raza Gilani said in talks with the IMF in Washington that his government was trying to broaden Pakistan's tax base and keep the budget deficit “close to” 5.1 per cent of gross domestic product, according to a statement from his office.


Pakistan turned to the IMF for an emergency package of $7.6 billion in November 2008 to avert a balance of payments crisis and shore up reserves.

The loan was increased to $11.3 billion in July last year and the central bank received a fourth tranche of $1.2 billion on Dec. 28. The fifth tranche will be for the same amount.

“(Gilani) however urged the IMF leadership and its board to take into account Pakistan's ground realities and practical difficulties while suggesting the required reforms measures,” the prime minister's office said. It gave no more details of the talks.

An IMF team concluded talks with Pakistani Finance Ministry officials in Islamabad on Tuesday on tariffs and taxes it wants to see imposed.

Under the IMF programme, the deadline for an increase in electricity tariffs was April 1 but Pakistan failed to meet it.

The IMF also required Pakistan to submit a value-added tax (VAT) law to parliament by the end of last December, but VAT on services is a provincial issue and so requires approval of the country's four provincial assemblies. They approved the new tax only recently, missing the IMF's deadline.

The IMF wants Pakistan to use the VAT to raise its ratio of tax revenue to gross domestic product (GDP) by 3 to 4 per cent, allowing greater government spending.

The current tax-to-GDP ratio is about 9 per cent, one of the lowest in the world.

The IMF was originally scheduled to meet on March 24 to approve the fifth tranche but the meeting was postponed to March 31, and then delayed again to mid-April, sparking speculation in the Pakistani media that the programme was in jeopardy.—Reuters

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