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BIG blow for Pakistan as IMF dismisses debt-management strategy, calls it 'unrealistic'

In light of Pakistan's faltering economy, the International Monetary Fund rejected the country's proposed Circular Debt Management Plan (CDMP) and demanded higher power prices.

India TV Business Desk Edited By: India TV Business Desk New Delhi Published on: February 02, 2023 17:06 IST
IMF, Pakistan, CDMP, Pakistan debt, Pakistan economy, Pakistan petrol price, pakistan news, shehbaz
Image Source : AP Pakistan Prime Minister Shehbaz Sharif.

Pakistan Economy News: Building more pressure on the already-distressed Pakistani economy, the International Monetary Fund (IMF) has rejected Pakistan’s circular debt management plan (CDMP). Additionally, the international financial organization has urged the Pakistani government to raise the price of energy by between PKR 11 and PKR 12.50 per unit in order to cap the additional subsidy at PKR 335 billion for the current fiscal year.

There have been discussions between the IMF and Pakistan to conclude the ongoing 9th review under the $7 billion Extended Fund Facility (EFF).

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The IMF has dubbed Pakistan's updated CDMP, which is based on a few false assumptions, as 'unrealistic'. To limit the losses in the electricity industry, the Pakistani government will need to modify its recommended course of action. The circular debt was originally expected to be Rs 1,526 billion, but the amended CDMP has called for an increase of Rs. 952 billion for the current fiscal year. On Wednesday, the Pakistani government provided the IMF with its updated CDMP.

Revised CDMP for the Pakistani government also showed that the government still needed an additional $675 billion in subsidies despite significantly increasing power prices. IMF has also questioned this and asked how the Pakistani government arrived at its estimate of an extra subsidy demand. The updated CDMP calls for capping DISCO losses at 16.27% on average for the current fiscal year.

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Reportedly, the Pakistani government expects to recover the postponed Fuel Price Adjustment (FPA) charges to bring in $20 billion as opposed to the forecasts of $65 billion made last summer.


1- Why does Pakistan continuously seek loans from the IMF?
Pakistan is seeking loans from the IMF because it finds it difficult to obtain funds for imports and debt repayment.

2- What made the IMF label the Pakistani CDMP 'unrealistic'?
The Pakistani CDMP was labeled "unrealistic" by the IMF since it was allegedly based on false assumptions.

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