ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are discussing exchange-rate policy and a series of economic reforms as negotiations on the country’s loan programme continue in Islamabad, according to Finance Ministry sources.
Talks on the draft Memorandum of Economic and Financial Policies (MEFP) have begun as officials seek to narrow differences and finalise commitments under the programme. Exchange-rate policy remains among the key areas under discussion. The IMF has consistently advocated greater exchange-rate flexibility, arguing that the rupee should be allowed to respond to external pressures while Pakistan continues rebuilding its foreign exchange reserves.
The IMF mission is also holding discussions with officials from the finance, petroleum and privatisation ministries. Issues expected to feature in the talks include gas tariffs, power-sector reforms, distribution company privatisation and electricity line losses. According to Finance Ministry sources, discussions with the Federal Board of Revenue have already been completed.
Sugar policy and fuel support
The two sides are also discussing reforms in the sugar sector, with the IMF seeking implementation of policy measures across the provinces, according to the sources. Fuel subsidies are another area under consideration. The sources said support for existing eligible consumers could continue, while the IMF has opposed expanding the scheme to additional beneficiaries.
Electric vehicle tax concessions
Tax treatment of electric vehicles has also emerged as an issue during the negotiations. Finance Ministry sources said the IMF has raised objections to concessional sales tax treatment available under the auto policy, including incentives for electric vehicles.
A revised auto policy is being prepared following the discussions and is expected to be presented to Prime Minister Shehbaz Sharif. One option under consideration would raise the sales tax on electric vehicles from the concessional 1% rate to the standard 18%, according to the sources. Similar changes could also apply to electric-vehicle charging stations. The discussions form part of wider negotiations between Islamabad and the IMF over economic policies and reforms required under Pakistan’s loan program.
