ISLAMABAD: The International Monetary Fund (IMF) on Monday did not immediately endorse the interim government’s proposals to reduce industrial electricity prices, settle over one-fifth of the circular debt and make the Rs268 billion debt of the Pakistan International Airline (PIA) part of the public debt.
The IMF also asked as to why the interim government is showing haste when the Election Commission of Pakistan (ECP) has already barred it from taking any decisive action on the privatisation of PIA, according to government sources.
The global lender sought more details about the economic and legal viability of the three major proposals. The IMF held two back-to-back virtual meetings but their outcomes were below the expectations of the Pakistani authorities.
The next round of discussions on these proposals would take place after the Pakistani authorities provide additional information and the global lender reviews it internally.
The IMF neither rejected nor accepted the three proposals. It emerged from these two meetings that the IMF would give more serious thoughts to them once an elected government takes charge.
The caretaker government is keen on getting the three proposals implemented before leaving the office.
The meetings took place on the request of Pakistani authorities just three days before the general elections scheduled for this Thursday.
The ECP on Sunday refrained the interim government from taking anything to the federal cabinet related to the PIA privatization and questioned its legal mandate.
The spokesman of the Ministry of Finance, Qamar Abbasi did not respond to a question about the IMF’s response to the proposals and sought more information. The IMF resident representative, Esther Perez, also did not reply.
The sources said the IMF’s main objection to the PIA’s proposed debt settlement plan was about the urgency in taking the PIA debt into the government’s books. The government was claiming that the entity was ripe for privatisation and its future proceeds would be available to pay off the debts but still it wanted to take the Rs268 billion on its books before the end of the caretaker setup.
The IMF wanted further clarity about the likely timing of the PIA privatisation and the minimum reserve price, if any, worked out by now by financial advisors. The sources said the IMF’s query was why not to wait for the PIA privatisation proceeds to settle the debt.
The sources said that there was also a question on the treatment of the PIA’s debt that it owes to the Civil Aviation Authority (CAA), the Federal Board of Revenue (FBR) and the Pakistan State Oil (PSO).
The IMF was informed about the arrangement among the commercial banks and the federal government about the Rs268 billion debt restructuring. The government and commercial banks had agreed on the Rs268 billion debt restructuring plan.
Under the understanding, the government will use the PIA sale proceeds for principal payments, resorting to the budget if insufficient funds are available. Banks, in return, accept a 10-year debt rollover with a 12% annual interest.