Pakistan has accused the International Monetary Fund (IMF) of forcing the country to hike interest rates and electricity prices that doubled the cost of debt servicing and increased inflation.

Finance Minister Shaukat Tarin said inflation had increased due to high capacity payments and the IMF forced the government to increase electricity prices by 46 percent at the start of the loan program.

“The IMF put a gun to our head to set the interest rate at 13.25%, which increased the debt servicing.”

 “The high-interest rate added Rs1.5 trillion into the annual debt cost and that was a gift from the (erstwhile) Pakistan Muslim League Nawaz  (government).” said Tarin.

“Debt servicing increased because of the increase in interest rates,” Tarin told The Express Tribune.

In a rejoinder to PML-N’s critique of the government’s economic policies, the minister also said that when the party was in power, the 5.5 percent economic growth rate was fueled by borrowings.

The foreign lenders had set three conditions for investing in the government debt: the real positive interest rates, stable exchange rate and waiver of taxes on profits earned on hot foreign money.

The Express Tribune had reported that acceptance of these conditions led to inflows of USD 3.6 billion in a year that evaporated the moment the central bank cut the interest rates after the outbreak of the Covid-19.

To a question, Tarin said the investment-to-GDP ratio have declined during the three years of the present government, but it was because of the Covid 19 outbreak.

“The 5.5 percent growth rate [during the tenure of the previous government] was fueled by massive borrowings that also heated up the economy,” the minister claimed.

“The last government kept the rupee artificially overvalued that caused a $20 billion current account deficit.”

He said under the IMF program, the government had curbed demand, leading to an increase in poverty.

“The government will increase tax revenues by 20 percent every year and improve the collection to Rs7 trillion in two years,” Tarin maintained.

To a question, Tarin said the IMF program was not heading towards suspension and the government  giving an alternate for not increasing the electricity prices.

(SAM)