Missed target: IMF says $6.7b bailout ‘broadly on track’

International lender concludes first review of the programme.

ISLAMABAD:

The International Monetary Fund (IMF) has said that Pakistan’s $6.7 billion loan programme is ‘broadly on track’ on Friday as the country missed its target for building foreign currency reserves.

Amid increasing problems with balancing its external account, Pakistan and the IMF announced the successful conclusion of the first review of the programme. The IMF staff will now submit a report on Pakistan’s progress to the international lender’s board for review in late December.

If approved, the IMF will release the next tranche of $550 million, said the Fund’s Washington-based mission chief for Pakistan, Jeffrey Franks, at a news conference in Islamabad alongside Finance Minister Ishaq Dar.

Following the review, the IMF has also imposed new structural benchmarks on energy and privatisation in addition to overall conditions which were agreed upon earlier but not mandatory to meet.



While Franks said the programme was broadly on track, he said there were difficulties on the balance of payments front and action was needed to build up Pakistan’s foreign currency reserves.

“The net international reserves target could not be met due to lower than expected external flows – including foreign investment and other official assistance – and interventions by the State Bank of Pakistan to ease pressure on the rupee,” reads the IMF handout.

Franks added that the IMF had reached an agreement with the State Bank on policies required to tackle the issue. Reinforcing the programme’s earlier conditions, the lender has asked Islamabad to stem the reserves using options such as exchange rate deprecation and increasing discount rate.

Finance Minister Dar acknowledged the urgency of building up foreign currency reserves, which have been depleting fast in spite of the IMF bailout.

He added that Pakistan missed the quantitative performance criterion on net international reserves because of the delay in the disbursement of the $322 million Coalition Support Fund and the non-realisation of Etisalat receipts worth $800 million.

Dar told reporters that economic growth and revenue collection was better than IMF’s expectations during July-September this year – the period under review. He said the Federal Bureau of Revenue had collected Rs469 billion in taxes, which despite being lower than the government’s target of Rs506 billion, was higher than IMF’s target of Rs436 billion for the period.

Dar said things were on track on the energy front and the government had paid Rs80 billion in subsidies after June.

The minister added that the government was expecting $1.5 billion – including $700 million for Dasu dam – from the World Bank before the end of the current fiscal year.

The IMF handout, meanwhile, stated that although the balance of payments challenge would likely persist for some time, the lender had been assured firm action would be taken to improve foreign exchange reserves.

“The [Pakistani] authorities have reaffirmed their commitment to align monetary and exchange rate policies to this objective, while maintaining price stability,” it read.

Published in The Express Tribune, November 9^th, 2013.