Lack of tenable answers to the IMF may delay release of funds to Pakistan: Report
Dec 24, 2022
Islamabad [Pakistan], December 24 : With the Pakistan Finance Ministry being unable to furnish tenable answers for the IMF to commence formal negotiations on the 9th review, it may delay the release of funds from the IMF, according to a report in the Financial Post.
The IMF visit to Pakistan which was scheduled for October has been delayed amidst differences between Pakistan's commitment to the IMF on fiscal consolidation.
"Pakistan and the global lender continued talks virtually but differences still persisted over tax collection targets, and non-starter energy reforms including hiking of gas tariff, rising circular debt, and expenditure overrun, making consensus harder to strike on a staff-level agreement for completion of the review," according to the Financial Post report.
Pakistan had in the current fiscal, estimated flood-related reconstruction costs at PKR 251 billion (USD 1.1 billion). The IMF had asked Pakistan to include these costs in the current budget, after terming them as unrealistic and at variance with the Post Disaster Needs Assessment (PDNA) report.
According to the Financial Post, the IMF has also raised serious reservations against the recently announced package (PKR 1800 billion) by the Pakistan Finance Minister for the agriculture sector and PKR 110 billion subsidies for concessional electricity to export-oriented sectors, which is a clear deviation and violation of the 7th and 8th reviews.
The IMF asked for detailed expenditure and revenue figures, including those for flood response up to June 30, 2023, when the programme ends.
Esther Perez Ruiz, IMFs Resident Representative for Pakistan, had asked the country to review monetary and exchange rate policies. According to Ruiz, the country needs to re-examine the targets for fiscal discipline and deficit control and fix multiple economic indicators.
"Islamabad had created a "credibility gap" with the IMF. Pakistan is asking for softening IMF conditions citing flood related damages and expenditure over-runs, instead of providing clear picture of the economy as well as its plan of action for reforms. Islamabad's non-action is irritating the multilateral lender. The IMF has communicated that it requires completion of all end-quarter performance criteria and targets," reported the Financial Post.
Recently, the media reported that Pakistan's past and present Finance Ministers disagree on whether the national economy is still in the red ahead of its ninth review by the International Monetary Fund (IMF).
While current Finance Minister Ishaq Dar feels the country's performance is up to the mark and ready for the IMF review, his predecessor Miftah Ismail believes that the default risk would not subside unless the IMF and other multilateral lenders came to the table.
