The International Monetary Fund (IMF) on Thursday questioned Pakistani authorities on the upcoming general elections as well as the functioning of the Special Investment Facilitation Council, the two most crucial issues that have affected the country’s political and economic landscape.
Nathan Porter, the Washington-based lender’s head of mission in Pakistan, raised these points during his first meeting with Acting Finance Minister Dr Shamshad Akhtar.
Porter set the tone for the 14-day review talks which are expected to end on November 15 – if all goes as planned.
The IMF official praised the government’s performance in the first quarter of the current fiscal year – an area where the Finance Ministry and the Federal Board of Revenue (FBR) have so far exceeded expectations.
The head of the mission raised the issues of the next general elections and the functioning of the SIFC, at least two participants in the meeting told the Express Tribune.
They said the Acting Finance Minister said she would arrange the meetings of the IMF delegation with the Election Commission of Pakistan (ECP) and the SIFC secretariat.
Hours after the opening session of the IMF-Pakistan, President Dr Arif Alvi and the ECP agreed on the election date of February 8 when they met on the directives of the Supreme Court, thereby clarifying the political horizon of the country.
The election date has direct implications for the next review of the IMF program as well as any new agreements with the Washington-based lender.
The tentative date for the IMF board meeting for the next review is March 1, implying that the third review of the $1.2 billion tranche is expected to take place around February next year.
The current $3 billion IMF bailout was granted for a period of nine months, ending in April next year, on the assumption that the new government would enter another program after the elections.
The IMF mission on Thursday began discussions for the first review of the $3 billion program, which would pave the way for approval of a $710 million loan tranche by the board of directors of the US-based lender in Washington in December.
The IMF imposed a set of conditions in almost every major area of the budget, with some of them time-limited and others to be implemented throughout the fiscal year.
SIFC is a civil-military body established to attract foreign investment to Pakistan.
According to a recent report by the Policy Research Institute of Market Economy (PRIME), the SIFC may be failing in its mission to attract significant foreign investment due to its lack of attention to structural issues.
The PRIME report warned that including the military in economic decision-making without the required expertise could not only destabilize the country, but also lead to the failure of key initiatives.
However, an SIFC official denied the concerns raised in the PRIME report, arguing that it was too early to pass judgment on the body, which had only just started its work in June this year.
The sources said the IMF mission chief presented the energy sector and tax reforms as the main areas of discussion during the review talks.
The IMF delegation will also examine the circular debt management plan. The plan is implemented to control circular debt in the power sector.
The lender’s Washington-based team asked about the government’s policy on gas supply to fertilizer plants, referring to the latest meeting of the Economic Coordination Committee (ECC) of the Cabinet.
On Wednesday, the ECC failed to agree on stopping the supply of subsidized gas to two fertilizer factories and extended it for another two weeks in a bid to develop consensus among all stakeholders.
According to the sources, the IMF team also suggested the Pakistani government to stop fixing fuel prices.
The government sets fuel prices every fortnight, but the IMF says they should be left to market forces.
Former Finance Minister Miftah Ismail once suggested ending his ministry’s role in determining fuel prices, but the proposal was later abandoned.
The acting finance minister also assured the IMF to hold a briefing on the Sovereign Fund, which the government created in August and transferred the assets of profitable entities to it.
The head of mission asked for details on the implementation of the public enterprise policy, which has remained largely a dead letter and has made little progress.
A federal minister, an advisor and a special assistant to the Prime Minister sit on the boards of some of these companies, in violation of rules and regulations.
During the first quarter of this fiscal year, the Ministry of Finance demonstrated solid performance.
Unlike the previous fiscal year, no new additional grants were provided during the first quarter, meeting another important IMF condition.
The ministry also fulfilled the conditions of limiting the fiscal deficit and increasing the petroleum tax to a maximum of Rs 60 per liter on petrol as well as high-speed diesel.
Low federal development spending may be a problem.
Also on Thursday, US Ambassador to Pakistan Donald Blome visited Senator Ishaq Dar, Leader of the House of Representatives in the Senate.
“The progress and current status of the ongoing IMF program were discussed,” said a statement issued by the Senate Secretariat.
Senator Dar, a four-time former finance minister, expressed optimism about the positive conclusion of the second review of the IMF program.
The four provincial governments also fulfilled the IMF condition of ensuring spending of Rs465 billion on health and education during the first quarter. Actual spending exceeded this requirement, totaling Rs482 billion.
The IMF also put a condition that the FBR shares details of asset declarations of civil servants with commercial banks for the purpose of due diligence of customers.
The IMF will receive the status of the implementation of the condition next week.
Learn more “SIFC faces obstacles in attracting FDI”
The FBR fulfilled the condition of collecting Rs 1.98 trillion in taxes during the first quarter of this fiscal year.
It also achieved the target of adding only Rs32 billion to tax refunds during the first quarter, staying within the target of limiting refunds to Rs247 billion.
According to a statement issued by the Ministry of Finance, Porter appreciated the caretaker government’s commitment to achieving the first quarter targets and welcomed the steps taken in some critical areas.
He further stressed the importance of continuing these efforts to maintain the economic stability of the country.
The statement said that Acting Finance Minister Dr. Akhtar expressed his appreciation for the IMF’s continued support and assistance.
She reaffirmed the government’s commitment to working closely with the IMF to ensure the success of the Stand-By Arrangement (SBA) and achieve economic objectives, the statement added.