IMF talks start with polls date in focus

ISLAMABAD:

The International Monetary Fund (IMF) on Thursday inquired the Pakistani authorities about the next general elections as well as the functioning of the Special Investment Facilitation Council -- the two most crucial issues that affected the country’s political and economic landscapes.

Nathan Porter, the Washington-based lender’s mission chief to Pakistan, raised the points during his maiden meeting with interim Finance Minister Dr Shamshad Akhtar.

Porter set the tone for the 14-day long review talks that are scheduled to end on November 15 -- if everything goes according to the plan.

The IMF official praised the government’s performance during the first quarter of the ongoing fiscal year -- an area where the finance ministry and Federal Board of Revenue (FBR) had so far exceeded expectations.

The mission chief raised the issues of the next general polls and the SIFC’s functioning, at least two participants of the meeting told The Express Tribune.

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They said the interim finance minister said she would arrange the IMF delegation’s meetings with the Election Commission of Pakistan (ECP) and the SIFC secretariat.

Hours after the IMF-Pakistan opening session, President Dr Arif Alvi and the ECP agreed on February 8 as the elections date when they met on the directives of the Supreme Court, clearing the air on the political horizon of the country.

The elections date has direct implications on the next IMF programme review and also on any new deal 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 for the $1.2 billion tranche should take place in around February next year.

The current $3 billion IMF bailout was given for a period of nine months, ending in April next year on the assumption that the new government would enter into another programme after the elections.

On Thursday, the IMF mission began discussions for the first review of the $3 billion programme, which would pave the way for the approval of a $710 million loan tranche by the Washington-based lender’s executive board in December.

The IMF has imposed a set of conditions in nearly every major area of the budget, with some of them being time-bound and others to be implemented throughout the fiscal year.

The SIFC is a civil-military body set up to attract foreign investment in Pakistan.

According to a recent report by the Policy Research Institute of Market Economy (PRIME), the SIFC may fall short of its mission to attract significant foreign investment because of its lack of focus on structural issues.

The PRIME report cautioned that the inclusion of the military in economic decision-making without the requisite expertise could not only destabilise the country, but also lead to the failure of key initiatives.

However, an SIFC official negated the concerns raised in the PRIME report, arguing that it was too early to make a judgment about the body, which had just started working in June this year.

The sources said the IMF mission chief outlined the energy sector and tax reforms as the primary areas of discussions during the review talks.

The IMF delegation will also review the Circular Debt Management Plan. The plan is being implemented to control the circular debt in the power sector.

The Washington-based lender’s team asked about the government’s policy on the supply of gas to fertiliser plants, while referring to the last meeting of the Economic Coordination Committee (ECC) of the Cabinet.

On Wednesday, the ECC could not agree on the discontinuation of subsidised gas supply to two fertiliser plants and extended it for another two weeks aimed at developing consensus among all stakeholders.

The sources said the IMF team also suggested to the Pakistani government that it should no longer set the fuel prices.

The government fortnightly sets the fuel prices but the IMF is of the view that they should be left to the market forces.

Former finance minister Miftah Ismail had once suggested ending the role of his ministry in determining the fuel prices, but subsequently the proposal was shelved.

The interim finance minister also assured the IMF to arrange a briefing on the Sovereign Wealth Fund, which the government had set up in August and transferred the assets of profitable entities into it.

The mission chief sought details about the implementation of the state-owned enterprises (SOEs) policy, which largely remained on paper with little progress.

A federal minister, adviser, and special assistant to the prime minister are sitting on the boards of some of these companies in violation of rules and regulations.

During the first quarter of this fiscal year, the finance ministry demonstrated a strong performance.
Unlike the previous fiscal year, no new supplementary grants were issued during the first quarter -- meeting another important IMF condition.

The ministry also met the conditions of restricting the budget deficit and increasing the petroleum levy to a maximum of Rs60 per litre on petrol as well as high-speed diesel.

There may be an issue about the low federal development spending.

Also on Thursday, US Ambassador to Pakistan Donald Blome called on Senator Ishaq Dar, the leader of the house in the Senate.

“The progress and current status of the ongoing IMF programme were discussed,” a statement issued by the Senate secretariat read.

Senator Dar, a former four-time finance minister, expressed his optimism about the successful conclusion of the second review of the IMF programme.

The four provincial governments have also met the IMF’s condition to ensure a spending of Rs465 billion on health and education during the first quarter. The actual spending exceeded this requirement, totalling Rs482 billion.

The IMF has also placed a condition that the FBR would share the details of asset declarations of civil servants with commercial banks for customer due diligence.

The IMF will receive the status on the implementation of the condition next week.

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The FBR has met the condition to collect Rs1.98 trillion in taxes during the first quarter of this fiscal year.

It has also achieved the target of adding only Rs32 billion to tax refunds during the first quarter, staying within the target of restricting refunds to Rs247 billion.

According to a statement issued by the finance ministry, Porter appreciated the interim government's commitment to meeting the first quarter targets and commended its measures taken in some critical areas.

He further underscored the importance of continuation of these efforts for staying on track for the economic stability of the country.

The statement read that Interim Finance Minister Dr Akhtar expressed her appreciation for the continued support and assistance of the IMF.

She reaffirmed the government's commitment to working closely with the IMF to ensure the successful completion of the stand-by arrangement (SBA) and achieve the economic objectives, it added.