Cash-strapped Pakistan's negotiations with the International Monetary Fund (IMF) for a bailout package faced difficulties as the international lender sought complete disclosure of Chinese financial support and hiking of energy prices and levying more taxes, media reports said today.
The IMF delegation, which was in Pakistan for nearly two weeks, is set to conclude talks with senior officials today over arranging an unspecified amount to help the country in addressing the balance of payment crisis.
As talks enter the final phase, the IMF set stricter conditions for Pakistan to implement in exchange for a bailout package - much needed for economic revival.
Some of the major conditions include imposition of more taxes worth Rs. 150 billion, further reduction in the rupee value as well as a tighter monetary policy. It also sought from Pakistan all details of financial support from China for any bailout package to Pakistan.
Led by its mission chief Harald Finger, the IMF delegation is holding meetings with government officials to know their viewpoint on the reforms.
There were no indication that the two sides are close to any agreement, Dawn newspaper reported.
Finance Minister Asad Umar said yesterday that the talks were moving ahead positively but there were still differences, the report said.
"There are still gaps in the position of the IMF and the position that we have," Mr Umar said after a series of meetings with the IMF team.
Mr Umar said the IMF visit would conclude today and he had no funding emergency to worry about day after tomorrow.
He said that $1 billion of the $3 billion committed by Saudi Arabia had been remitted to the State Bank of Pakistan yesterday and the remaining $2 billion would follow over the next few days.
Pakistan looks forward to about $6 billion financial bailout for averting its balance of payments crisis.
Informed sources said the two sides had a wide gap in their positions on the need for increase in electricity tariff, upward revision in the revenue target and additional tax measures on matters relating to Chinese assistance and its impact - both inflow and outflow.
The sources said the IMF also demanded that the provincial governments finance the Benazir Income Support Programme (BISP), instead of the federal government, and wanted committed cash surpluses to minimise the consolidated fiscal deficit.
Regarding China's financial help, the minister said there was complete transparency.
The sources told the paper that the IMF mission wanted a clear roadmap for elimination of power sector circular debt that currently stood at Rs. 1.2 trillion and welcomed administrative measures to recover some arrears, but insisted on further increasing electricity rates for full cost recovery of power supply, it said.
The sources said the IMF team was not satisfied with the power sector reforms plan and wanted the government to surrender its powers to set electricity tariff and let these be independently dealt with by the power regulator.
Pakistan's current account deficit widened 43 per cent to $18 billion in the fiscal year that ended in June, while the fiscal deficit has ballooned to 6.6 per cent of gross domestic product.
The sources told the paper that the IMF was very critical of the fiscal federalism arrangements at present and noted with concern that the Centre had transferred all profitable taxes to the provinces while keeping all necessary expenditures of provincial nature as federal responsibility.
The IMF mission also sought a complete market-based free float of the exchange rate and complete independence to the State Bank of Pakistan, the top bank of the country.