The International Monetary Fund (IMF) team will finalise the schedule for its next visit to Pakistan for the fifth review under the Stand-By Arrangement (SBA) programme within the next 15 days, sources close to IMF told Business Recorder here on Monday. This effectively implies that the SBA is stalled, not cancelled, analysts said.
According to sources, the IMF team intends to visit Pakistan possibly during the coming May for the fifth review wherein the Fund would once again observe the implementation of structural reforms committed by the government in the five Letters of Intent it has submitted to the Fund. Of special relevance would be the achievement of a sustainable fiscal deficit which the Ministry of Finance has already assured the IMF team would be contained at 5.3 percent of GDP.
During the recently concluded visit of the IMF team - from March 1 to 11, the Ministry of Finance had tried hard to convince the IMF to restore the stalled penultimate tranche release of $1.7 billion under the SBA. The fifth review, originally scheduled to take place before end-September 2010, has been further delayed.
The structural benchmark on implementing a value added tax (termed RGST) on July 1, 2010 and the end-June 2010 performance criteria on general budget deficit and government borrowing from the central bank were missed. Subsequently, the economic conditions deteriorated markedly as a result of the floods, requiring significant amendments to the 2010/11 budget. Corrective actions needed to complete the fifth review could thus not be implemented.
The Finance Ministry told the IMF mission that the revenue collection target was originally fixed at Rs 1667 billion at the time of budget 2010-2011 but later the target was revised downward to Rs 1630 billion. The FBR has estimated Rs 1604 billion tax collections by the end of current fiscal if the RGST is not implemented during the last quarter of the current year. Also the broadening of tax base would generate an additional amount of Rs 5 billion and recovery of arrears would help collect Rs 5 billion during the remaining months of 2010-11. These proposed revenue and administrative measures would help collect nearly Rs 46 billion in the remaining months of 2010-2011.
The government has borrowed Rs 443 billion from domestic sources during the first six months of the current fiscal year to finance the budget deficit against Rs 166 billion that was estimated in the budget for the current fiscal year. All bilateral and multilaterals have linked release of budgetary support assistance with the issuance of Letter of Comfort by the IMF. A total of US $1.036 billion foreign aid/funds were received from bilateral and multilateral sources during 2010-11 (July-January) that is in addition to disbursements under CSF. Out of this civilian assistance $464 million was earmarked for development projects, $96 million for programme loans/budgetary support; $39 million for earthquake relief; $149 million under Tokyo pledges; $3 million for Afghan Relief and Reconstruction Authority; $10 million for Floods (Citizen Damage Compensation) and $275 million for other projects.
The external debt servicing of Pakistan stood at $2.169 billion during first quarter (July-September) of ongoing financial year, according to Pakistan Debt Policy Statement 2010-11. During July-September 2010, Pakistan''s servicing on external debt was recorded at $2.169 billion. Out of the grand total, principal repayments were $1.436 billion and interest payments were $233 million. On the other hand, the International Monetary Fund (IMF) website indicates that in 2011 there have been no disbursements to Pakistan however $25.8 million repayment is due to the Fund during calendar year 2011. In case the Fund approves release of the stalled tranche the repayment as well as interest payments would rise for the year.
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