IMF Shares Draft MEFP, Pakistan Seeks Economic Relief Amidst Talks on $7 Billion EFF

Islamabad:The **International Monetary Fund (IMF)** has shared a draft of the **Memorandum of Economic and Financial Policies (MEFP)** with the Pakistani government, paving the way for a potential staff-level agreement under the **$7 billion Extended Fund Facility (EFF)**. The agreement could unlock further financial support for Pakistan, including the **release of a $1 billion tranche** from the IMF.

The **IMF** has shown willingness to offer some relief for the **construction** and **real estate sectors**, although it remains unclear whether these measures will be implemented immediately or included in the **2025-26 federal budget**.

Negotiations between Pakistan and the IMF concluded last Friday, but a **staff-level agreement** was not reached at that time. This agreement is a prerequisite for Pakistan to submit an official request to the **IMF’s Executive Board** for the **release of the $1 billion installment**.

### Key Provisions of the MEFP:
The draft MEFP includes **stringent conditions** to ensure **fiscal discipline**, such as:
1. **Tax Revenue Target Adjustments**: The **Federal Board of Revenue (FBR)**’s tax collection target has been lowered.
2. **Spending Cuts**: These are intended to help achieve the **primary surplus** target set for the current fiscal year, as agreed with the IMF staff.

### Points of Disagreement:
– **Petroleum Levy**: One of the major points of contention between the IMF and the Pakistani government is the proposal to impose a **Rs 70 per liter levy on petroleum products** to generate more revenue, which would then be used to **reduce electricity prices**. The IMF has questioned the sustainability of this strategy, particularly if **global oil prices rise**, and how the government will manage to avoid passing the burden on to the public while addressing the **circular debt** issue in the energy sector.

– **Circular Debt**: Pakistan presented a **6-year plan** to eliminate the **2.4 trillion rupees** of circular debt burdening the energy sector. This proposal has been approved by the IMF, which will provide financial relief, as the new loan will not be added to public debt figures.

### Debt Servicing and Future Plans:
– The government plans to generate **Rs 300 billion** annually by imposing a **Debt Servicing Surcharge (DSS)** of **Rs 3 per unit** on **electricity bills**. This surcharge is expected to help cover the **debt servicing** for the new loans, though officials have clarified that the **DSS** will not be revised downward and will remain at **Rs 3 per unit**.

– **Energy Minister Owais Ahmad Khan Leghari** commented that while no final decision has been received yet, he remains hopeful that the IMF has approved loans from **banks**, as there has been no violation of any principles related to **debt-to-GDP ratio** or other fiscal parameters.

As the negotiations progress, all eyes are on whether these fiscal and financial measures will be accepted by the IMF and how they will impact Pakistan’s economic recovery in the coming months.