pakistan bad failed implement 16 of 28 conditions of the International Monetary Fund (IMF) set for A tranche of USD 1.1 billion, including the main condition for increasing foreign exchange reserves, instead went negative by a whopping nearly $11 billion.
failure fulfillment of conditions forces global creditor slap eight more terms on Pakistan in in addition to indicating the new due dates for actions that remain outstanding, a consolidated report is shown of 7th and 8th Program Reviews published by the IMF on Friday.
The report suggests that global the lender had everything reason to set difficult conditions for revival of the rescue package due to bad track record of in government led by the Pakistani Tehreek-e-Insaf.
A little of conditions that were required for implementation within last quarter of fiscal year were conceded due to slips occurring before coalition government enter into power.
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Nonetheless coalition government led by PML-N, too, could not immediately reverse the course in order to fix the lack of trust with in global creditor.
IMF board had give failure this week to pave way for revival of thwarted program and release of tranche of $1.1 billion.
The country missed the conditions for increasing foreign exchange reserves and reduce home budget deficit to a sustainable level. It might also No ensure full payments to recipients of Benazir Income Support Program, failed adequately spend on health care and education, remained unable to pay tax refunds and could not limit power sector losses.
Former prime minister Imran Khan, who was earlier against tax amnesty scheme but only when it was not in powergave another tax amnesty scheme, a few days before his overthrow. He also allowed tax breaks and government couldn’t push forward reform agenda, the report says.
“General program performance remains weak since completion of in last review (February 2022) and until recently,” the message says. it added some quantitative criteria and gaps were missed in implementation, in particular, of a program of fiscal and structural reforms arose under difficult circumstances, including internal political unrest and the aftermath of the war. in Ukraine, but also “the waning resolve to push forward agreed reforms.
Pakistan did not meet the conditions of the main program like limitation net international reserves to minus $4.7 billion by June of this year year. Instead, the country net According to the report, foreign exchange reserves remained negative by $10.8 billion. This was a major blunder that left Pakistan in risk of default due to negative reserves.
Trust in the country hit stone bottom in in eyes of in international creditors and players. Some members of executive board of IMF also questioned back rowing in in board meeting that was held on August 29 to approve the tranche of the loan in the amount of 1.1 billion dollars.
Primary constraint condition budget a deficit of up to 25 billion rupees by June was also omitted due to budget delays. Instead, the country booked around 2 trillion rupees in the primary phase. budget deficit. The IMF said reserve and deficit conditions were also missed for end of March period.
Pakistan also missed conditions of not impose currency restrictions and discourage the practice of using multiple currencies. it also failed to fulfill the condition of without imposing import restrictions. coalition government had to take steps to avoid default after previous PTI government failed to build sufficient reserves.
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Pakistan also failed to meet the condition for the distribution of funds in the amount of 250 billion rupees to BISP beneficiaries and narrowly missed the target of 15 billion rupees. The federal and provincial governments were required to spend 2.1 trillion rupees on health care and education, but the actual expenditure fell short by 218 billion rupees. of goal.
Federal Council of Income was failed to fulfill the condition of cessation of accumulation of tax arrears and instead added 147 billion rupees more in reimbursement pool.
the IMF allowed add 166 billion rupees more in circular debt in previous financial year but the actual increase in in power Sector payments arrears amounted to Rs 536 billion, down Rs 370 billion from the target mainly due to delayed tariff adjustments and higher- than expected generation and financial expenses. These goals were also missed for end of March 2022.
outside of 10 structural landmarks set to carry out reforms, Pakistan missed seven, the report said.
In violation of its obligation, PTI government gave another tax amnesty scheme before it was pushed out of power. it also granted preferential tax treatment to several favorites one. Previous government also failed prepare a project of Personal income tax law on the agreed date of February 2022.
government also could not ensure timely approval of in new Law on State Enterprises (SOE). it also failed to make a plan for phasing out of SBP refinancing services. Previous government failed to fulfill his obligation for first- phased recapitalization of two private sector banks that are sinking.
it also could not install asset declaration system for in public office owners and government employees.
New terms and conditions
because of failure to meet the conditions, the IMF revised its targets and also added new terms for qualifying in next $3 billion in loan tranches.
The IMF asked Pakistan to increase the BISP beneficiary base to nine million families. using NSER by June next year.
Pakistan will have to fully realize the increase of Rs 7.91 per unit. in electricity prices by start of from October to reduce circular debt which already underway.
So be it also must petition NEPRA for fuel for July 2023 price adjustment by the end of August; as well as first quarter of this fiscal year petition for quarterly fare increases by the end of October to fully offset revenue needs, including lost profits due to delay first- stage of annual relocation.
According to the fourth condition government will have to take a comprehensive strategy to deal with high levels of problem loans (NPLs) in some banks, including by requiring bank-specific plans for reduction in non-performing loans, and record-off fully secured non-performing loans. This condition should to be met by June next year.
government will also must initiate orderly liquidation of one or both of two currently undercapitalized private sector banks by the end of May 2023 after these banks failed meet capital requirements.
government will have to submit a plan to the federal cabinet to agree on Pakistan’s early intervention, bank crisis resolution and management measures with international good practice, in line with IMF staff advice by the end of October 2022.
government it is necessary to put in place a centralized monitoring group (CMU) in the Ministry. of Finance by the end of January 2023 to monitor state-owned enterprises.
Importantly, Pakistan will publish a comprehensive review of anti-corruption institute framework (including the National Accountability Bureau) by task force with participation and contribution of reputable independent experts with international experience and civil society organizations by the end of January 2023.