Pak-IMF talke on performance review begans

ISLAMABAD, July 15: The talks of Pakistani government with International Monetary Fund (IMF) Thursday begun on fourth review for economic performance prior to approval of next tranche of 1.3 billion dollar tranche by its board of directors next month with little hope getting waiver on non observance of performance criteria.

Sources in the Finance Ministry said that talks on GST, power issues as well as fiscal deficit would be a major challenge and tough to convince IMF delegation.

The IMF will be given briefing on economic performance on the ongoing fiscal year as well about the budget numbers and trade, fiscal, inflations targets as well as State Bank of Pakistan monetary related issues. The discussion would be held on budget numbers, VAT implementation or plan (B) if any and how much revenue would be increased with the reformed GST or VAT. The IMF delegation would also hold discussions on issues relating to the power sector including tariff differential, governance and cash flow of PEPCO.

Sources in the Ministry of Finance revealed that the provinces have not been taken on board with respect to collection of sales tax on services. In addition sources in the Finance Ministry revealed that despite an increase in power tariff, a gap of 33 per cent in PEPCOs cost recovery tariff on account of fuel alone, excluding line losses, remains. The high ups of the Ministry of Finance would submit a plan during talks with the IMF as to how this massive gap would be bridged.

The plan proposes three alternatives: to switch to cheaper fuel (hydel or gas), improve performance of PEPCO, and/or pass on the 33 percent tariff differential onto the consumers.
However concerns in the Ministry of Finance remain that the IMF may delay the release the next tranche of $1.3 billion till October 1 when the reformed GST is due to be implemented or in case of a delay in GST implementation may club it with the final tranche that is due in December 2010.
Pakistani delegation will be led by Finance Minister Dr Abdul Hafeez Sheikh for the next and final review talks with the Fund in Washington, DC prior to approval for the release of the sixth and final tranche.
Out of the $11.2 billion SBA programme, Pakistan has so far received $8.7 billion and it is expecting to receive around $2.6 billion in the last two installments till December 2010.
The government has so far been unable to meet the budget deficit target of 5.1 percent of the GDP equivalent to Rs 769 billion and may touch 6.2 percent of GDP or over Rs 900 billion for fiscal year 2009-10. The zero borrowing related condition from the central bank was also breached for June 30, 2010 hence Pakistan is compelled to seek waiver on these two performance criteria.
ENDS.