ISLAMABAD: The International Monetary Fund (IMF) has reset four delayed Structural Benchmarks (SBs) and set eight new SBs including finalization of the combined annual rebasings (AR) for fiscal year 2022 and fiscal year 2023 for ongoing reforms under the Extended Fund Facility (EFF) programme.
The IMF report “seventh and eighth reviews under the extended arrangement under the extended fund facility” noted eight new SBs: (i) targeted increase of the BISP Kafalat beneficiary base to 9 million families using the NSER (end-June 2023); (ii) finalization of the combined annual rebasings (AR) for fiscal year 2022 and fiscal year 2023 to take effect on October 1, 2022 (end-September 2022); (iii) submission to NEPRA of petitions for the fiscal year 2023-July FPA by end-August; and fiscal year 2023-Q1 QTA by end-October which will ensure full recovery of the revenue requirement (including lost revenue from the delayed first-stage Annual Rebasing FYs22-23 in July 2022) within FY23Q2 (end-Sep 2022); (iv) adoption of a comprehensive strategy to address high levels of NPLs in some banks, including by requiring bank-specific plans for reducing NPLs, and to write-off of fully provisioned NPLs (end-Jun. 2023); (v) initiate orderly liquidation (resolution) of either or both of the two currently undercapitalized private sector banks by end-May 2023 should that they remain undercapitalized at that point (end-May 2023); (vi) submission to Cabinet of amendments to align Pakistan’s early intervention, bank resolution, and crisis management arrangements with international good practices, in line with IMF staff recommendations (end-Oct. 2022); (vii) operationalization of a Central Monitoring Unit (CMU) within the Ministry of Finance (end-Jan. 2023); and (viii) publication of a comprehensive review of the anticorruption institutional framework (including the National Accountability Bureau) by a task force with participation and inputs from reputable independent experts with international experience and civil society organizations (end-Jan. 2023).
The report noted that programme implementation deteriorated shortly after the completion of the sixth review. Amid a tense political landscape, programmed fiscal adjustment was undone and several key EFF commitments were reversed. Two end-June performance criteria (PC)—on net international reserves (NIR) and the primary budget deficit—as well as three continuous PCs were missed. Moreover, SBs were unmet.
The authorities met one SB and implemented two with delay, against the ten SBs due through end-June 2022. Specifically, parliament adopted the OGRA Act Amendments for the gas sector in March (end-June 2022 SB). In addition, with delay, the Public Procurement Regulatory Authority (PPRA) issued in May regulations for publication of beneficial ownership information in large procurement contracts (end-March 2022 SB), and measures were adopted in June to strengthen the effectiveness of the AML/ CFT framework (end-March 2022 SB).
At the same time, the authorities missed seven SBs, as they granted further tax amnesties (continuous SB) and new preferential tax treatments (continuous SB), most of which lapsed in line with their embedded sunset clauses by the time of the fiscal year 2023 finance bill.
Their draft Personal Income Tax (PIT) law also deviated from the commitment during the sixth EFF review (end-February 2022 SB). Finally, despite significant progress in the face of capacity constraints, four SBs remain outstanding and, thus, will be reset (i.e., the parliamentary approval of the new state-owned enterprise (SOE) law, a plan for the phasing out of SBP refinance facilities, first-stage recapitalization of two private sector banks, and establishment of an asset declaration system).
Copyright Business Recorder, 2022
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