Pakistan has received the nod for funding to the tune of $2 billion from Saudi Arabia, finance ministry sources on Wednesday said.
The development is a significant step towards reaching a staff-level agreement with the International Monetary Fund (IMF), which has imposed the condition of Pakistan securing $3 billion from other countries for the revival of its $6.5 billion bailout package.
Apart from Saudi Arabia giving the green signal for the provision of $2 billion to Pakistan, the sources said Finance Minister Ishaq Dar would meet the leadership of the UAE before leaving for the US on April 10.
The sources further said the IMF was still insisting on its demand for a further increase in the interest rate according to inflation and opposing the annual subsidy of Rs900 billion.
They added that the global lender was unwilling to budge from its demand for Pakistan to collect Rs850 billion in terms of the petroleum development levy (PDL).
The finance ministry sources said the IMF was demanding from Pakistan to reduce its import of petrol and diesel.
They added that the global lender had also demanded to meet the shortfall of the PDL and taxes.
The IMF has been pushing the government to increase the PDL to Rs50 per litre on all petroleum products, according to the sources.
The federal government had recently increased the PDL on high-speed diesel (HSD) by Rs5 per litre, pushing it up from Rs45 to Rs50 per litre.
The government had already increased the PDL on high-quality petrol to Rs50 per litre in November last year.
Back then, the Economic Coordination Committee (ECC) of the cabinet, after deliberations, allowed the increase in PDL from Rs30 to Rs50 per litre on RON 95 and above-grade fuel with effect from November 16, 2022.
Last month, the IMF said Pakistan had made “substantial progress” toward meeting policy commitments needed to unlock loans the country needs to avoid default.
The international lender said Pakistan had a few more tasks before it could unlock a $6.5 billion loan to avoid a default, putting pressure on the government to secure assurances from countries that have promised financing support.
Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said a staff-level agreement would follow once the few remaining points were closed.
The country has taken tough measures including increasing taxes and energy prices, and allowing its currency to weaken to restart the $6.5 billion IMF loan package.
Published in the Logical Baat, March 6, 2023.