Delays by donors hurt government''s ability to meet targets: LoI approved by IMF before the release of fourth tranche

The government expects no aid injection from bilateral sources this year under the Friends of Democratic Pakistan (FODP) pledges made in Tokyo in April 2009. The only pledges expected to be translated into disbursement are from multilateral sources.
The technical Memorandum of Understanding (MoU) under the standby arrangement on the International Monetary Fund (IMF) website reveals the disturbing fact that disbursements under FODP pledges were zero between July and December 2009. It says the Fund expects around 100 million dollars between July 2009 and March 2010, and another 270 million dollars between July 2009 and June 2010.
This brings total disbursements from FODP to 370 million dollars, short by 1.93 billion dollars, as indicated in the budgetary estimates for fiscal year 2009-10. The shortfall is attributed to only multilateral sources, like World Bank, Islamic Development Bank, Asian Development Bank extending assistance. There are no expectations from bilateral sources, it says.
Analysts have expressed concern over the veracity of these figures, especially in the context that Saudi Arabia had extended a loan of 380 million dollars in December, out of which it had said that 280 million dollars be considered as part of the FODP pledge. There are a few who believe that the scaled down amount of 370 million dollars, expected from FODP as noted in the technical MoU till the end of the current fiscal year, is unlikely to be met.
However, it has been agreed between the IMF and the government of Pakistan that in case there is a shortfall in Tokyo-related disbursements from multilateral sources: (i) the ceiling on the consolidated overall budget deficit (excluding grants) is adjusted downward by the shortfall in Tokyo-related disbursements in rupee terms, (ii) the floor on the Net Foreign Assets of the SBP is adjusted downward by the amount equivalent to the cumulative shortfall in Tokyo-related disbursements in dollar terms, and (iii) the ceiling on Net Domestic Assets of the SBP is adjusted upward by the amount equivalent to the cumulative shortfall in Tokyo related disbursements in rupee terms. However, the net borrowing from the SBP by the government will not be adjusted.
The LoI states that early disbursement of the donor support pledged in Tokyo is needed to keep stabilisation program on track. This donor support will protect budgeted social and growth-oriented development spending, and help finance support for internally displaced persons (IDPs). Although little support has been received since July, firm commitments have been received and timely disbursements will be needed in order to protect key social and development spending, the LoI added.