New Delhi [India], February 2 (ANI): Former Indian diplomat Mahesh Sachdeva on Thursday said that the International Monetary Fund (IMF)'s rejection of Pakistan's revised Circular Debt Management Plan (CDMP) is symptomatic of the situation in Pakistan.
He said that economically, the country has been facing headwinds all the time.
"Pakistan's own economic mismanagement and economic policies have come back to haunt the country," he said.
"In a way, the extended finance facility of seven billion dollars that Pakistan seeks from IMF is no different from our own UDAY 1, UDAY 2 schemes but the context is quite different," the former diplomat told ANI.
He said that while India solves its problems itself, Pakistan has to go to IMF to seek funds to pay the discoms and then the discoms pay the power gen co etc. etc. So, it becomes circular debt management.
IMF review mission has rejected Pakistan's revised Circular Debt Management Plan (CDMP). It has called on the Pakistan government to increase the electricity tariff in the range of Pakistani Rupees (PKR) 11-12.50 per unit to restrict the additional subsidy at PKR 335 billion for the current fiscal year, The News International reported.
The International Monetary Fund review mission led by Nathen Porter arrived in Islamabad on Monday. Both sides will continue to hold talks to complete the pending ninth review under the USD seven billion Extended Fund Facility (EFF).
Circular debt occurs when one entity facing problems with its cash inflows does not make payments to its suppliers and creditors, according to The News International.
The IMF has called the revised CDMP "unrealistic", which is made on the basis of certain wrong assumptions. The Pakistan government will have to make changes in its policy prescription to restrict the losses of the power sector, as per The News International report.
The IMF and Pakistan's Ministry of Defence will work out a gap on the fiscal front after which various additional taxation measures will be finalised through the upcoming mini-budget.
The revised CDMP has called for an increase in the circular debt to the tune of Rs 952 billion for the current fiscal year against an earlier projection of Rs 1,526 billion.
The Pakistan government shared its revised CDMP with the IMF high-ups on Wednesday.
The Pakistan government's revised CDMP demonstrated that the government needed an additional subsidy of Rs 675 billion despite increasing the power tariff in the range of PKR 7 per unit through quarterly tariff adjustment in the first two quarters of 2023 and PKR 1.64 for the third quarter from June to August. (ANI)