‘Unrealistic’ flood cost baffles IMF
Rescued flood victims sit in a boat, following rains and floods during the monsoon season in village Arazi, in Sehwan, Pakistan, September 11, 2022. PHOTO: REUTERS
Pakistan on Thursday had to concede to the International Monetary Fund’s (IMF) demand to exhibit the flood reconstruction cost in this year’s budget after the global lender found the projected relief operation estimates of Rs251 billion or $1.1 billion “unrealistic”.
The Rs251 billion estimates that the finance ministry had shared with the IMF this week did not match with the political statements and the figures published in the Post-Disaster and Need Assessment report prepared by international lenders.
The government had estimated that the burden of the Rs1.8 trillion Kissan Package would not exceed Rs66 billion.
“The Rs251 billion figure is exclusive of the financing requirements that the country might need for the reconstruction needs and also delays the [IMF] mission's arrival till next month,” an official of the finance ministry said.
“If the IMF does not send its mission to Pakistan in the next two weeks, the disbursement of the next loan tranche will not materialise until January,” the official added.
The estimates submitted to the IMF left a lot of grey areas, considering the fact that the government still lacked the district-wise data of the people affected by the floods, bringing to the spotlight the Post-Disaster and Need Assessment report.
The IMF is seeking the details of the cost of the flood relief and rescue, and more importantly the rehabilitation and reconstruction needs during the fiscal year 2022-23 as against the multi-year estimates of $16.3 billion or Rs3.5 trillion.
“The exact cost of the flood relief and reconstruction needs is critical to revising the IMF programme framework and determining the accurate requirements for additional revenue and expenses cut measures,” the official said.
To break the gridlock, Finance Minister Ishaq Dar held an online meeting with Nathan Porter, the IMF mission chief for Pakistan.
Later, the finance ministry announced that it was agreed that the expenditure estimates for flood-related humanitarian assistance during the current year would be firmed up along with the evaluation of priority rehabilitation expenses.
The ministry added that for this purpose, an engagement for finalising the rehabilitation cost estimates “at the technical level shall be expeditiously concluded for proceeding with the 9th Review”.
Finance Minister Dar reiterated Pakistan’s commitment to successfully completing the IMF programme.
The statement marks a departure from the earlier position where the finance ministry was not willing to show the reconstruction cost in this fiscal year’s budget.
The finance ministry stated that the two sides discussed the progress made with the ongoing IMF programme, particularly the impact of floods on macroeconomic framework and targets for the current year. The IMF indicated its willingness to sympathetically view the targeted assistance for poor and vulnerable, especially the flood-hit people.
The official said the IMF was asking for the details of the reconstruction cost that would be booked in the budget in this fiscal year. However, the official added that the Flood Resilient Recovery And Reconstruction Framework would not be ready before December 15.
“It is the responsibility of the planning ministry to timely provide the reconstruction framework,” the official said, adding: “We see a delay here.”
A government functionary told The Express Tribune after the IMF video call that it had been decided that the finance ministry would ask the planning ministry to at least provide the priority expenditure details, as there was a delay in finalising the plan.
The official added that the IMF’s mission chief to Pakistan was not convinced that against the estimated reconstruction cost of $16.3 billion or Rs3.5 trillion, no money would be spent in the current fiscal year.
According to the official, this had delayed the IMF mission’s visit to Pakistan, despite the government sharing the budgeted estimates of the flood relief and rescue operations.
Dr Aisha Pasha, the minister of state for finance, said they were hoping that the IMF would send its mission to Pakistan by the end of this month, while responding to a question whether or not the global lender’s team’s visit to Islamabad had been delayed at least until December.
Any further delay might aggravate Pakistan’s economic situation due to the pause in the disbursement of the budget-supported loans by the World Bank.
The State Bank of Pakistan reported on Thursday that during the week ending on November 11, the gross official reserves remained shy of $8 billion -- not enough to meet the foreign financing needs.
Sources said there was some frustration in the finance ministry over the IMF delaying sending its mission to Pakistan as it had again started sending negative signals to the markets and foreign think-tanks.
Under the revised schedule agreed in June, the IMF should have sent a mission to Pakistan in October which would have paved the way for the release of another tranche of about $1.2 billion on November 3.
Esther Perez, the resident representative of the IMF, did not respond to a question whether or not the IMF mission’s visit was linked to the finalisation of the Flood Resilient Recovery and Reconstruction Framework.
The sources said to convince the IMF, Pakistan had submitted the cost details being borne by the federal as well as the provincial governments to the global lender this week.
The Rs251 billion was the cost of shelters, food and humanitarian assistance.
The IMF was informed that out of the Rs251 billion, a sum of Rs164 billion had already been disbursed.
The remaining requirements from November through June next year were estimated at Rs87 billion, according to the sources.
However, the IMF’s objection was that the Rs251 billion estimated cost did not match with the political claims and relief packages announced by Prime Minister Shehbaz Sharif.
The IMF has been informed that so far, Rs88 billion had been released by the finance ministry, Rs3 billion by the Punjab government, Rs40 billion by the Sindh government, Rs25 billion by the Khyber-Pakhtunkhwa government and Rs8 billion by the Balochistan government.
The remaining estimated requirements are mainly Rs66 billion for the Kissan Package; Rs10 billion for picking up the cost of waiver and deferring the fuel-cost adjustments for the months of August and September; and Rs4 billion for the flood response.
The sources said a sum of Rs2 billion would be given to the National Disaster Management Authority for damage surveys of the flood-affected areas.