ISLAMABAD Pakistan poorly failed to apply 16 of the 28 conditions that the International Monetary Fund( IMF) had set for$1.1 billion tranche, including the core condition to increase foreign exchange reserves that rather have turned negative by a whopping nearly$ 11 billion.

The failure to meet the conditions has impelled the global lender to poke eight further conditions on Pakistan in addition to giving fresh deadlines to meet the conduct that remained unimplemented, showed the combined report of the 7th and 8th programme reviews that the IMF released on Friday.

The report suggests that the global lender had every reason to set tough conditions for the reanimation of the bailout package due to a bad track record of the government led by the Pakistan Tehreek-e-Insaf.

Some of the conditions that were needed to be enforced during the last quarter of the financial time were missed due to slippages that passed before the coalition government came into power.

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still, the coalition government led by the PML- N, too, couldn’t incontinently reverse the course, which would have repaired the trust deficiency with the global lender.

The IMF board had to give a disclaimer this week to pave the way for the reanimation of the derailed programme and the release of the$1.1 billion tranche.

The country missed the conditions to increase its foreign exchange reserves and reduce the primary budget deficiency to a sustainable position. It could also not insure full disbursements to the heirs of the Benazir Income Support Programme, failed to adequately spend on health and education, remained unfit to pay the duty refunds and couldn’t circumscribe the power sector losses.

Former high minister Imran Khan, who used to be against the duty remittal scheme but only when he wasn’t in power, gave another duty remittal scheme, days before his ouster. He also allowed duty immunity and his government couldn’t push forward the reforms docket, revealed the report.

“ Overall programme performance has remained weak since the completion of the last review( February 2022) and until lately, ” according to the report. It added several quantitative criteria were missed and gaps in enforcing particularly the financial and structural reform docket arose amid grueling circumstances, including domestic political fermentation and spillovers from the war in Ukraine, but also a “ waning resoluteness to push forward agreed reforms ”.

Pakistan missed core programme conditions like confining the net transnational reserves to negative$4.7 billion by June this time. rather, the country’s net foreign exchange reserves remained negative by$10.8 billion, according to the report. This was a major slip that exposed Pakistan to the threat of dereliction due to negative reserves situations.

The country’s credibility has hit the gemstone bottom in the eyes of the transnational creditors and the players. Some members of the superintendent board of the IMF also questioned the aft paddling in the board meeting that had been held on August 29 to authorize the$1.1 billion loan tranche.

The condition to circumscribe the primary budget deficiency to Rs25 billion by June was also missed due to financial slippages. rather the country reserved around Rs2 trillion primary budget deficiency. The IMF said that the reserves and deficiency conditions were also missed for the end- March period.

Pakistan also missed the conditions of not to put exchange restrictions and discourage multiple currency practices. It also failed to meet the condition of not assessing import restrictions. The coalition government had to take the way to avoid dereliction after the former PTI government failed to make sufficient reserves.

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Pakistan also missed the condition to distribute Rs250 billion finances among the BISP heirs and missed the target by a periphery of Rs15 billion. The civil and parochial governments were needed to spend Rs2.1 trillion on health and education but the factual spending remained Rs218 billion short of the target.

The Federal Board of profit had failed to meet the condition of stopping accumulation of duty refunds arrears and rather added Rs147 billion further into the refunds pool.

The IMF had allowed to add Rs166 billion further in the indirect debt in the former financial time but the factual increase in the power sector payment arrears was Rs536 billion, missing the target by Rs370 billion substantially due to belated tariff adaptations and advanced- than- anticipated generation and fiscal costs. These targets had also been missed for the end- March 2022 period.

Out of 10 structural marks set to bring reforms, Pakistan missed seven, showed the report.

In violation of its commitment, the PTI government gave yet another duty remittal scheme before it was ousted from power. It also gave preferential duty treatment to a many favourites one. The former government also failed to prepare the draft of the Personal Income Tax law at the agreed date of February 2022.

The government also couldn’t insure timely blessing of the new state- possessed enterprise( SOE) law. It also failed to make a plan for the phasing out of SBP refinance installations. The former government couldn’t recognize its commitment for first- stage recapitalisation of two private sector banks that are sinking.

It also couldn’t establish an asset protestation system for the public office holders and the civil retainers.

New deadlines and conditions

Due to the failure to meet the conditions, the IMF has now revised the targets and also added new conditions for qualifying the coming loan tranches, amounting to$ 3 billion.

The IMF has asked Pakistan to increase the BISP devisee base to nine million families using the NSER by June coming time.

Pakistan will have to completely apply the Rs7.91 per unit increase in electricity prices by the launch of October to reduce indirect debt, which is formerly under perpetration.

It’ll also have to submit to NEPRA desires for the July 2023 energy price adaptation by end- August; and first quarter of this financial time daily tariff increase solicitation by end October to completely recover the profit demand, including lost profit from the delayed first- stage Annual Rebasing.

According to the fourth condition, the government will have to borrow a comprehensive strategy to address high situations ofnon-performing loans( NPLs) in some banks, including by taking bank-specific plans for reducing NPLs, and to write- off completely provisioned NPLs. This condition should be met by June coming time.

The government will also have to initiate orderly liquidation of either or both of the two presently undercapitalised private sector banks by end- May 2023 after these banks failed to meet capital conditions.

The government will have to submit a plan to the civil press to align Pakistan’s early intervention, bank resolution, and extremity operation arrangements with transnational good practices, in line with IMF staff recommendations by end- October 2022.

The government ought to operationalise a Central Monitoring Unit( CMU) within the Ministry of Finance by end- January 2023 to cover state- possessed enterprises.

Importantly, Pakistan will publish a comprehensive review of the anticorruption institutional frame( including the public Responsibility Bureau) by a task force with participation and inputs from estimable independent experts with transnational experience and civil society organisations by end- January 2023.

 

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