Pakistan and the International Monetary Fund (IMF) will on Thursday sit across the table to conduct the first review of the $3 billion Stand-by-Arrangement (SBA) and Islamabad is confident that it would sail through the review with approval as it has met all the fiscal targets.
Sources in the Finance Ministry expressed optimism about the successful completion of the first review (July to September) under the SBA, adding that the the government realises the importance of the arrangement and the necessity to compliance of all requirements of the IMF.
In July, Pakistan and the IMF had reached the SBA for a bailout package for a period of nine months.
Pakistan received the first installment of $1.1 billion and now is geared up to present its economic performance to the IMF delegation, led by the Fund's country chief Nathan Porter.
While Islamabad’s optimism seems to be well-placed, there are some looming challenges that the government may have to face scrutiny on during its review meetings with the IMF.
One of the main challenges for Pakistan has been the external financing, which may come under scrutiny during the review.
The budgeted $4.5 billion loans from foreign commercial banks and a $1.5 billion through issuance of Eurobonds for the current financial year, are yet to materialise.
As per the statement of the Monetary Policy on October 30, it was emphasised that an urgent need of realization of expected external inflows, pivotal to creating space for credit to private sector and to consolidate and improve the NFA of a banking system.
On the other hand, the new tax collection measures and their effective implementation has played vital role in revenue collection in the first quarter of the ongoing fiscal year, which was higher than targeted.
“Substantial increase in net federal revenue, driven by arise in non-tax revenue collection, inclusive of petroleum levy, reflects a positive trend in revenue performance”, said a Finance Ministry source.
Interim-Minister for Energy Muhammad Ali said that the country is also on target in terms of gas and oil sector.
“The government increased gas and electricity tariffs to achieve full cost recovery and to arrest and reduce the circular debt of both the sectors. As far as Establishment of central monitoring unit for state-owned entities (SOEs) is concerned, a CMU has been established in the Finance Division and it is working on the preparation of performance reports of SOEs for the last three years”, he said.
“These reports will be shared with the IMF during the second review scheduled for December."
The crucial IMG review will be conducted in two phases, covering both technical talks and policy-level discussions.
On ground, there is a widespread criticism on the government for pushing the masses into poverty by increasing prices of fuel and gas in order to meet the requirements of the IMF.
However, the government maintains that compliance with the IMF is the only option it has in order to get the country out of the looming economic meltdown threats.
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