IMF programme on track: Miftah Ismail

ISLAMABAD: The International Monetary Fund has not yet shared nine tables along with the Memorandum of Economic and Financial Policies (MEFP) for completion of combined reviews. However, Finance Minister Miftah Ismail has said that the IMF programme is on track. In his tweet on Monday, Miftah said: “I have been reading with some amusement all the tweets and stories about the IMF programme being delayed due to some anti-corruption laws. There is no truth to it. The IMF programme is on track.”

However, top official sources confirmed to The News that Pakistan sent back responses to the IMF on different queries last Saturday evening. But the IMF had not so far shared nine tables for explaining and reconciling macroeconomic and financial figures to comply with the MEFP document. It indicated that the shared MEFP was still incomplete and Pakistan would have to do more spadework for signing a staff-level agreement.

Without having nine tables along with the MEFP draft, the staff-level agreement will not be done. When it's signed between the two sides, it will pave the way for forwarding a formal request for granting approval of two reviews and releasing a $1 billion tranche under the $7 billion Extended Fund Facility (EFF).

The official sources close to the Finance minister claimed last week that the staff-level agreement was expected to be done within the ongoing week. But if the nine tables were not shared, how the staff-level agreement would be struck within the ongoing week. They said the required tables might be shared with Pak authorities after the announcement of the upcoming monetary policy.

The Monetary Policy Committee is scheduled to meet on July 7 to take a decision on hiking the policy rate at a time when the CPI-based inflation has surprised everyone by touching 21.3 per cent. Now if the policy rate brings major surge, the monetary figures might result in bringing changes to all other tables framed by the IMF staff in reconciliation with Pakistani authorities. There is another outstanding issue which may be raised by the IMF as the fund staff asks Pakistan to strike a memorandum of understanding (MoU) among the centre and provinces for generating the revenue surplus by the federating units to the tune of Rs 750 billion in the current fiscal year’s budget.

Earlier, Pakistan and the IMF had struck an agreement on the budget 2022-23, which was passed by the National Assembly and then enacted as the Finance Act 2022. However, the government had to revise the budgetary estimates mainly because the government kept the Gas Infrastructure Development Cess (GIDC) to the tune of Rs 200 billion, but the IMF refused to accept it. Then the government had to revise downwards the GIDC target from Rs 200 billion to Rs 30 billion. It created a hole of Rs 170 billion. Secondly, the revenue surplus target for the provinces was revised downwards from Rs 800 billion to Rs 750 billion.

To bridge this gap on the fiscal front, the government was forced to slap additional taxes in shape of super tax and take other measures to bring high net worth individuals and companies into the tax net with higher rates. Now another issue might surface as the Punjab has announced subsidy for electricity users because this kind of subsidy might not be acceptable to the IMF. On the corruption-related institutional strengthening, the IMF placed it as a structural benchmark on the occasion of completion of 6th review during the PTI government. However, it could not be accomplished. Now the IMF wants its inclusion as prior action, but Pakistani authorities are pursuing the IMF to extend the timeframe without changing its status from the structural benchmark. “The IMF agreement still seems possible, but the country will have to bring all its acts together as a piecemeal approach may not work,” the sources concluded.