Islamabad, February 27, 2023 (PPI-OT):Former Vice President of FPCCI Atif Ikram Sheikh on Sunday said interest rate hike by 200bps on IMF demand will be too much. The move will increase cost of doing business and bankrupt many businesses but it will also reduce inflation and strengthen rupee, he said. Pakistan has assured the IMF it will raise its policy rate by two percentage points in order to meet the conditions set by the lender to revive the loan programme, he added.
Atif Ikram Sheikh who has also served as Chairman PVMA said in a statement that the virtual negotiations between both sides continued and details regarding reforms in the power sector are being finalised which will lead to a staff-level agreement. The dysfunctional power sector has become one of the major stumbling blocks between Pakistan and the IMF.
Pakistan has also briefed the lender in detail on external financing till June, the sources said, adding that the IMF was also holding talks with the concerned countries for assurance. Our authorities have been negotiating with the IMF since early February over policy framework issues and are hoping to sign a staff-level agreement that will pave the way for more inflows from other bilateral and multilateral lenders.
Once the deal is signed, the lender will disburse a tranche of more than $1 billion from the $6.5 billion bailout agreed to in 2019. Pakistan has already taken a string of measures, including adopting a market-based exchange rate, hike in fuel and power tariffs, withdrawal of subsidies and more taxation to generate revenue to bridge the fiscal deficit.
The strict measures are likely to further cool the economy and stoke inflation, which stood at 27.50% in January. Pakistan’s economy has been in turmoil and desperately needs external financing, with its foreign exchange reserves dipping to around $3 billion, barely enough for three weeks’ worth of imports. Long-time ally China this week announced refinancing of $700 million which was a relief in the current situation.
For more information, contact:
Atif Ikram Sheikh
Ex. Chairman PVMA, Former VP, FPCCI,
Former President ICCI, Former President HCCI,
Tel: +92-51-4437597, 4440772
Fax: +92-51-4440773