Government plods towards IMF deal.

ISLAMABAD -- Pakistan has managed to convince the International Monetary Fund (IMF) to reduce external additional loan requirement to $6 billion amid government's desire to give Rs150 billion subsidised petrol package to motorcyclists.

In order to avoid an objection by the IMF, roughly Rs150 billion annual subsidy on account of Rs25 to Rs50 per litre is planned to be recovered from car owners, according to discussions that took place at the Prime Minister's House on Monday.

'The proposal is to raise the petrol price in the range of Rs300 to Rs325 per litre for car owners but reduce it to Rs250 to Rs225 per litre for motorcyclists,' according to sources.

Prime Minister Shehbaz Sharif is throwing a new challenge to the economic team at a time when the finance ministry and the State Bank of Pakistan (SBP) are already grappling with the issues of arranging $6 billion more loans and a further hike in the interest rates.

A high-ranking government functionary told The Express Tribune that the IMF and Pakistan last week found a middle ground on the issue of external financing gap. 'Against the IMF's earlier estimates of $7 billion external financing gap, both sides have now agreed to reduce the estimates to $6 billion,' he added.

The $1 billion reduction in financing needs means, lowering the new loan requirement by the same amount.

While addressing a news conference last week, Finance Minister Ishaq Dar said that he had valid reasons to believe that the external financing gap was not $7 billion but $5 billion.

'The reduction has been achieved by marginally reducing the projection of the current account deficit and lowering the foreign exchange building requirements,' he added. The current account deficit is now being projected around $7.7 billion -- as against the earlier IMF projection of $8.2 billion, he added.

Another roughly $500 million is being reduced against the projected foreign exchange reserves requirement for the current fiscal year. 'The IMF is now willing to consider the foreign exchange reserves level equal to 1.7 months of prospective imports cover,' according to the senior government functionary.

Pakistan's gross official foreign exchange reserves stand at $4.3 billion -- not enough for one month of import cover.

However, despite shaving off $1 billion from the estimates, Pakistan's woes have not ended. It still has to arrange assurances from the regional countries for $6 billion additional loans.

Pakistan has claimed that it has...