A day after its staff visit to Pakistan ended, on Saturday the International Monitory Fund (IMF) said it and the government had discussed that it was required to shift ‘more social and development responsibilities to provinces’.
The Conversation from Nov 12 to Nov 15 disclosed a $7-billion bail-out within six weeks of the IMF board approval but was early by more than three quarters for the first review of the EFF expected in Q1, 2025. Information on the completion of the Third Review talks between Pakistan and the IMF was kept in strict confidentiality from both sides, thanks for adjusting the fiscal data a week and a half back with Punjab as a cash-positive province where it was in a negative tally for years with the IMF.s to provinces”.
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The unscheduled visit from Nov 12 to Nov 15 discussed a $7-billion bailout within six weeks of its approval by the IMF board but came too early for the first review of the Extended Fund Facility (EFF), due in the first quarter of 2025.
Talks between Pakistan and the IMF concluded on Friday under tight secrecy from both sides, with a rare revision of fiscal data turning Punjab into a cash surplus province from a deficit one only a fortnight ago.
In an end-of-mission statement issued on Saturday, IMF mission chief Nathan Porter said: On fiscal and monetary issues, we concurred with the rationale that more needed to be done in conservative fiscal and monetary measures, in additional revenue mobilization from untouched sources, at the same time as a transfer of more social and development burdens to provinces. It has also called for “expanding the tax base” in September this year by the Fund’s Executive Board. (IMF) on Saturday said it and the government had agreed on the need to transfer “greater social and development responsibilities to provinces”.
The unscheduled visit from Nov 12 to Nov 15 discussed a $7-billion bailout within six weeks of its approval by the IMF board but came too early for the first review of the Extended Fund Facility (EFF), due in the first quarter of 2025.
Talks between Pakistan and the IMF concluded on Friday under tight secrecy from both sides, with a rare revision of fiscal data turning Punjab into a cash surplus province from a deficit one only a fortnight ago.
In an end-of-mission statement issued on Saturday, IMF mission chief Nathan Porter said: “We agreed with the need to continue prudent fiscal and monetary policies, revenue mobilization from untapped tax bases, while transferring greater social and development responsibilities to provinces.”
The Fund’s Executive Board had also stressed “broadening the tax base” in September.
In his statement today, Porter said IMF was “encouraged by the authorities’ reaffirmed commitment to the economic reforms supported” by the 2024 EFF.
He described live talks with the Pakistani authorities on economic objectives and reform initiatives as useful for the intent was ‘to contain risky developments and create the groundwork for at least better and sustainable growth’.
The IMF official underlined that “structural energy reforms and constructive efforts” were the key components to bring the sector back to life.According to the source during the recent talks, both the IMF and the government seemed to be stuck on the matter of the energy sector, especially as concerns rising indications of a situation resembling a default case in PSO and two other gas companies.policy and reform efforts as constructive, noting they aimed to “reduce vulnerabilities and lay the basis for stronger and sustainable growth”.
The IMF official highlighted that “structural energy reforms and constructive efforts” were critical to restore the sector’s viability.
During the recent talks, the IMF and the government were reportedly in a fix over energy sector issues amid rising fears of a potential default-like situation in the Pakistan State Oil (PSO) and two gas companies.
Porter also pointed out that the government should begin action to lessen the role of the state and to promote competition which will contribute to the growth of a competitive private enterprise.
The IMF official noted that – good program implementation can help achieve a ‘’larger and better’ Pakistan, argo raises living standards of all Pakistanis.”
“The next mission connected with the first EFF review should come in the first quarter of 2025,” the statement said.
The problem of economic growth oscillations further led Pakistan to go for 23 IMF bailouts since 1958.
Separately, a wrap-up meeting was conducted on Friday with the Pakistani team involving Finance Minister Muhammad Aurangzeb during which the desire of the country to enhance its loan program size came up and so did the climate financing under which Pakistan has applied for a further loan amount of $ 1.2 billion.
Provinces were now for the first time directly involved in negotiations with the IMF under a loan programme. Interacting sources mentioned that the IMF Stand. phone; As per officials now the Pakistan side has time up to February 2025 to overcome revenue shortfall which was Rs190 billion in the first four months of the current year; July to October.
It was for the first time that provinces were now directly part of the talks with the IMF under a loan program.
Sources said the IMF mission would give its formal feedback to the authorities in a few days, but officials said Pakistan had time until February 2025 to make up for revenue shortfalls that stood at Rs190bn in the first four months (July to October) of the current fiscal year.
Review discussions of portfolio and planned biannual targets would be completed by February end or early March to examine if the structure benchmark had met QAI requirements for the release of $1bn tranche for Pakistan.
Provinces come under discussion (IMF)
In the last wave of commitments, it was found that Pakistan has fulfilled one more quarterly target for the provincial cash surplus payment, and now, as the Punjab provincial government claimed it achieved the first quarter of FY25 with Rs40bn cash surplus, instead of a Rs160bn cash deficit as earlier estimated.
However, the Rs40 billion cash surplus in Punjab is the least among the three other provinces that had earlier met their liabilities for cash surpluses.
It was learned that the smaller provinces opposed the IMF’s call for leaving the wheat support price or subsidized issue price pointing out that it would cause a food security issue in KP and Baluchistan at least unlike what the IMF staff saw.
The IMF team looked ready to understand provincial issues, especially capacity limitations, and pledged to assist with implementing technical consultants not only for the agriculture tax but also for provincial funding of the Benazir Income Support Programme, higher education, and devolution of provincial development projects from the federal budget as well.
Sindh has not decided to fund these extra tasks.