IMF approves $500m for Pak budgetary support

ISLAMABAD: After the promulgation of two Presidential Ordinances for withdrawal of corporate income tax exemptions to fetch Rs70 billion to 140 billion and imposition of 10 percent power surcharge on consumers, the IMF’s Executive Board completed the second to fifth reviews under the Extended Fund Facility (EFF) and approved release of $500 million tranche for Pakistan’s budgetary support.

“Yes, the president has promulgated two ordinances under the Tax Laws Second Amendment Ordinance 2021 and the National Electric Power Regulatory Authority (NEPRA) amendment with effect from March 24, 2021. These two bills will be tabled before parliament soon. The IMF Board approved the tranche under the EFF arrangement, so the Fund programme came back on track. The timeframe for the programme has not yet been decided,” a senior official of the Ministry of Finance told The News after approval of the IMF’s Executive Board in a background discussion here on Thursday.

The Board’s decision allows for an immediate disbursement of SDR 350 million (about US$500 million), bringing total purchases for budget support under the arrangement to about US$2 billion.

Pakistan’s 39-month EFF arrangement was approved by the Executive Board on July 3, 2019 for SDR 4.268 billion (about $6 billion at the time of approval of the arrangement, or 210 percent of quota).

Following the Executive Board discussion on Pakistan, Antoinette Sayeh, Deputy Managing Director and Acting Chair, said: “The Pakistani authorities have continued to make satisfactory progress under the Fund-supported programme, which has been an important policy anchor during an unprecedented period. While the Covid-19 pandemic continues to pose challenges, the authorities’ policies have been critical in supporting the economy and saving lives and livelihoods. The authorities have also continued to advance their reform agenda in key areas, including consolidating central bank autonomy, reforming corporate taxation, bolstering management of state-owned enterprises and improving cost recovery and regulation in the power sector.”

“The fiscal performance in the first half of FY 2021 was prudent, providing targeted support and maintaining stability. The current monetary stance is appropriate and supports the nascent recovery. Entrenching stable and low inflation requires a data-driven approach for future policy rate actions, further supported by strengthening of the State Bank of Pakistan’s autonomy and governance.”

Meanwhile, the Pakistani authorities have conceded to the IMF that the data on government guarantees back in FY2016 was reported inaccurately due to which the revised data on the performance criteria for September 2019 missed with a margin of Rs357 billion.

The IMF’s Executive Board granted a waiver on non-observance and accepted the PTI’s led government stance for corrective measures to rectify the inaccuracy. The IMF did not impose any penalty for breaching obligations for offering the incorrect data. The IMF had fined Pakistan for giving wrong information in the past and also imposed a penalty of around $25 million in 2001 for reporting inaccurate data in 1998-99. A top official who had then dealt with the IMF said that the Fund took back one tranche of around $20 million to $25 million despite granting approval for releasing it. Since the government now enjoys “good relations” with the IMF, so it did not impose any penalty, he added.