Two key criteria missed

Pakistan has missed two performance criteria and one indicative target agreed with the International Monetary Fund (IMF) as noted in the staff report titled "2015 Article IV consultation and ninth review under the Extended Arrangement, request for waivers of non observance of performance criteria (PC), and request for modification of a performance criteria."
The two missed PCs include: (i) net domestic assets (NDA) of State Bank of Pakistan (SBP) target was missed by Rs 172 billion(4.9 percent of reserve money), and (ii) budget deficit target was missed by Rs 23 billion (close to 0.1 percent of GDP). One indicative target, namely the federal tax revenue, was missed by Rs 40 billion.
The staff review, however, notes that a combination of factors led to higher-than-programmed NDA in Q1 fiscal year 2015-16: an unusual seasonal demand for currency in circulation in connection with two Eid festivals, a higher volume of cash transactions in light of financial disintermediation related to the new financial transactions tax for non-filers, and injections into the interbank market to align money market rates close to the recently lowered policy rate. A revised path for NDA consistent with projected inflation was agreed, and, consequently, the end-December PC for NDA is proposed for modification to ensure adequate reserve money growth. The authorities agreed on a prior action for end-November NDA to ensure that they are on track for the revised end-December target. Based on preliminary information, provided by the authorities at the time of issuing this report, this prior action has been met.
The IMF has set seven new structural benchmarks (SB) for Pakistan. First the introduction of new amendments to the Anti-Money Laundering (AML) Act to cover important tax crimes by end-January 2016 with the objective of combating tax evasion and strengthening tax collection. The report stated that the authorities would introduce new amendments to the AML Act to Parliament to cover important tax crimes by end January to use anti-money laundering tools to combat tax evasion.
Second comprehensive monitoring system for tax audits would be put in place with quantitative performance criteria, such as the number of risk-based audits, as well as qualitative audit indicators by end December 2015 to strengthen tax collection. Third, enact amendments to the Penal Code 1860 and the Code of Criminal Procedures 1898 by end January 2016 to strengthen governance in the power sector.
Fourth, determine multi-year tariffs for Iesco and Lesco by end-January 2016 to prepare for Disco privatisation. Fifth, notify multi-year tariffs for Iesco and Lesco by end-April 2016 to prepare for Disco privatisation and sixth enact the Gas (Theft Control and Recovery) Ordinance 2014 by end-February 2016 to strengthen governance in the gas sector.
And finally, develop a new time-bound plan with specific measures to improve the business climate by end-February 2016. The end-December PC for NDA is proposed for modification to ensure adequate reserve money growth, and corrective measures have been taken to meet the revised target. The end-November SB on multi-year power tariffs is proposed to be replaced by two new SBs to facilitate completion within the timeline of privatisation. In addition, five new SBs in the areas of tax administration, energy sector and business climate reforms are proposed.
Fiscal underperformance in the first quarter of fiscal year 2015-16 is owed to a number of factors including a shortfall in federal tax revenues owing to lower international commodity prices and domestic disinflation, underperformance in the collection of Gas Infrastructure Development Cess (GIDC), and the temporarily reduced withholding tax rate on banking transactions, the review notes.