• Negotiations start on positive note
• Fund says govt must continue efforts to stay on track
• Review to be wrapped up on 16th after policy-level dialogue

ISLAMABAD: The caretaker government and the International Monetary Fund (IMF) kicked off the much-awaited loan review talks on a generally positive note on Thursday, setting the stage for a deep dive into forward-looking reforms under a nine-month bailout package, slated to be completed in March next year.

Caretaker Finance Minister Dr Shamshad Akhtar and the IMF’s mission chief for Pakistan, Nathan Porter, led their sides to the opening round of two-week-long negotiations to discuss the next tranche based on Pakistan’s performance in the first quarter that started in July.

Mr Porter “appreciated the government’s commitment” to meeting the first-quarter targets, the Ministry of Finance said in a statement after the meeting. He also “commended the government’s efforts and measures taken in some critical areas”, it said.

He underscored the importance of continuing these efforts to stay on track for ensuring the country’s economic stability, the ministry said.

The meeting was also attended by IMF’s resident representative in Islamabad, Esther Perez Ruiz, State Bank Governor Jameel Ahmed, Federal Board of Revenue (FBR) Chairman Amjed Zubair Tiwana, Securities and Exchange Commission of Pakistan Chairman Akif Saeed, Finance Secretary Imdadullah Bosal, senior finance ministry officials and several IMF delegates.

Dr Akhtar reported Pakistan’s official position on the progress made so far on the $3 billion short-term loan agreement — called the Standby Arrangement (SBA) — and explained the fiscal measures being taken to improve the economic situation.

These measures included a tight control on expenditures, both in terms of restricting the development programme and reducing subsidies and provincial fiscal controls, more than the programme’s requirements for the first quarter of the fiscal year, resulting in higher-than-targeted primary surplus and non-revenue collections.

The finance minister and other members of her team also had discussions with the visiting team on overall comprehensive reforms and measures undertaken by the FBR, resulting in higher-than-targeted revenue collections, not only at the end of the first quarter but even in October, the first month of the second quarter.

The government team also generally updated the IMF’s mission chief on the latest situation on the power sector’s circular debt, which was also in line with the indicative targets, as the consumer-end tariff had been rebased in July, as required under the structural benchmark.

The IMF’s team was also updated on the government’s strategies to address the circular debt issue as agreed under the SBA, both in the power and gas sectors, particularly the recent decisions for a massive increase in natural gas tariff to a level that there would be no circular debt addition during the current fiscal year.

Also, the petroleum development levy targets for the first quarter had not only been achieved but had now exceeded the indicative target for the entire fiscal to achieve an average of Rs55 per litre levy on petrol and diesel, as its rate had been increased to Rs60 for both products in the second quarter to help create a cushion for any possible fiscal slippage for unseen factors, the government told the IMF.

The sources said the targets on net international reserves (NIR) of the central bank were also generally in line with the first-quarter target of negative $14.55bn, but the second-quarter target of negative $13.8bn NIR could be a challenge, as total disbursements from multilateral and bilateral in the first half of the year are targeted at $12.2bn, including $5.45bn in the first quarter and $6.73bn in the second.

Officials said the technical-level discussions with relevant ministries and agencies would begin on Friday and then resume on Monday and continue throughout the next week.

During the next week, the IMF team would engage with power and petroleum divisions — being the main areas of past failures and rising fiscal slippages — the FBR, the SBP and key state-owned enterprises besides officials of the Benazir Income Support Programme.

Based on these technical discussions, the two sides are expected to take a break over the weekend and start a policy-level dialogue before wrapping up the review on Nov 16. The key discussions would remain on structural reforms, mostly in the SOEs, quarterly national accounts and climate-related public investment management assessment action plans.

Finance Minister Dr Akhtar also reaffirmed the government’s commitment to working closely with the IMF to ensure the successful completion of the SBA and achieve economic objectives.

Published in Dawn, November 3rd, 2023