The International Monetary Fund (IMF) met with Pakistani officials on Thursday in ISLAMABAD to discuss the upcoming general elections and the operation of the Special Investment Facilitation Council, two of the most important concerns affecting the country’s political and economic landscapes.
In his first meeting with Pakistan’s interim Finance Minister Dr. Shamshad Akhtar, Nathan Porter, the head of the Washington-based lender’s mission in Pakistan, brought up the issues.
If all goes as planned, the 14 days of review talks will wrap up on November 15 after being set in motion by Porter.
Financial ministry and Federal Board of Revenue (FBR) performance during the first quarter of the current fiscal year was commended by the IMF official.
According to reports, Pakistan’s interim finance minister promised to set up talks between the IMF delegation and the Election Commission of Pakistan (ECP) and the Secretariat of the Islamic Financial Code (SIFC).
In a meeting called by the Supreme Court, President Dr. Arif Alvi and the ECP settled on February 8 as the election date, removing uncertainty from Pakistan’s political future hours after the IMF-Pakistan opening session.
The next IMF programme review and any new contract with the Washington-based lender are both directly affected by the election date.
The third assessment for the $1.2 billion tranche is expected to take place in about February of next year, since the next review board meeting of the IMF is tentatively scheduled for March 1.
The present $3 billion IMF bailout was issued for a term of nine months, concluding in April next year on the expectation that the incoming administration would engage into another programme following the elections.
The first evaluation of the $3 billion program began on Thursday with the IMF delegation, setting the stage for the Washington-based lender’s executive board to approve a $710 million loan tranche in December.
Some of the IMF’s conditions are time-sensitive, while others will be executed gradually over the course of the fiscal year, but they affect virtually every significant part of the budget.
The SIFC was established as a joint civil-military organization to promote foreign direct investment in Pakistan.
The Policy Research Institute for a Market Economy (PRIME) has released a research claiming that the SIFC will fail to attract substantial foreign investment until it begins to pay more attention to structural difficulties.
The PRIME assessment warned that the failure of critical programs and the destabilization of the country could result from the military’s participation in economic decision-making without the necessary skills.
An SIFC official, however, dismissed the report’s worries as premature, given that the body only began operating in June of this year.
According to the sources, the energy sector and tax reforms were highlighted by the IMF mission chief as the key issues of discussion during the review meetings.
The IMF group will also assess the Circular Debt Management Plan. The electricity sector’s circular debt is being managed through the plan’s implementation.
The group from the Washington, D.C.-based lender referenced the most recent gathering of the Cabinet’s Economic Coordination Committee (ECC) to inquire about the government’s strategy regarding the provision of gas to fertilizer factories.
The ECC postponed the planned conclusion of subsidized gas to two fertiliser factories by two weeks on Wednesday because it could not reach a unanimous decision to discontinue the program.
According to the sources, the IMF delegation also recommended that the Pakistani government stop regulating fuel prices.
Fuel prices are fixed by the government every two weeks, but the IMF thinks they should be determined by market forces instead.
Former Finance Minister Miftah Ismail proposed eliminating his ministry’s control over petrol pricing, but the idea was eventually scrapped.
The Sovereign Wealth Fund was established in August by the government, and the assets of lucrative enterprises were transferred into it at that time. The interim finance minister also guaranteed the IMF that a briefing on the fund would be arranged.
The head of the expedition wanted to know more about the state-owned-enterprise (SOE) policy, which has so far only existed on paper.
Some of these corporations have a government minister, adviser, or special assistant on their boards, which is against the rules.
The Ministry of Finance had a productive first quarter of the current fiscal year.
Unlike the previous fiscal year, no new supplementary grants were provided during the first quarter — satisfying another major IMF criteria.
Along with reducing the budget deficit, the ministry also increased the fuel duty on gasoline and diesel to a maximum of Rs60 per liter.
The low level of federal spending on development may be a problem.
On Thursday, Senator Ishaq Dar, the head of the Senate, had a visit from US Ambassador to Pakistan Donald Blome.
According to a statement released by the Senate secretariat, “the progress and current status of the ongoing IMF programme were discussed.”
Senator Dar, a veteran of four terms as finance minister, has voiced confidence in the outcome of the IMF’s second evaluation of the country’s economic program.
The IMF’s requirement that the four province governments spend Rs465 billion on health and education in the first quarter was also met. The actual expenditures reached Rs482 billion, which is more above the minimum target.
The FBR is required by IMF regulations to provide commercial banks with information about government employees’ asset declarations so that the latter can do due diligence on those individuals.
The IMF will be updated on the condition’s progress next week.
The FBR has successfully collected the required Rs1.98 trillion in taxes during the first three months of the current fiscal year.
In addition, it has stayed within its Q1 goal of limiting tax refunds at Rs247 billion by increasing them by only Rs32 billion.
The Finance Ministry released a statement saying that Porter approved of the interim government’s measures in several key areas and praised their dedication to attaining their first quarter goals.
He further underlined the need of continuance of these measures for staying on course for the economic stability of the country.
The interim finance minister, Dr. Akhtar, thanked the IMF for their “continued support and assistance,” according to the statement.
She reiterated the government’s dedication to collaborating closely with the IMF to fulfill the stand-by agreement (SBA) and realize the economic goals, it was reported.
