IMF to release $850 million next tranche this month

KARACHI - The federal government and the International Monetary Fund (IMF) are holding important meetings on Friday in Turkey to discuss the new budget, elimination of subsidies, the status of disbursement of next tranche and provision of the CFS for the stock market, The Nation learnt.
Official sources said the fund is expected to disburse the next tranche of $850 million in July after the completion of talks in Istanbul, Turkey on Friday.
To meet the IMF requirements, the government has started phasing out subsidies on oil and electricity that would pave way for the release of next tranche of loan from the fund, said sources.
Adviser to Prime Minister on Finance Shaukat Tarin would lead the Pakistans economic team in talks with the IMF.
They said, during the meeting, the government and the IMF would also discuss governments debt instruments, inter-corporate debt of power companies, over all liquidity situation and capitalization of the money market and government deposits in banks and non-banking financial institutions.
However, Pakistans economic managers would look for the appropriate cut in interest rate in the upcoming monetary policy owing to the current comfortable situation which would ease IMF concerns regarding imbalances and help SBP officials to convince IMF for further rate cuts in the next policy review.
The Fund would ask about the amount used by the public fund (NIT)-SEF for interventions in the stock market, their impact, stocks holdings by foreigners of shares listed on the Karachi Stock Exchange (KSE), and status of reforms of broker financing (badla).
As anticipated, the FY10 budget has been chalked out on a theme to stimulate the flattering domestic economy while remaining within the confines of the IMF program conditionalities. It must be recalled that the International Monetary Fund was set to review Pakistans economic performance at a meeting in Dubai on June 28, 2009.
The meeting will discuss measures announced in the new budget (for the next financial year, beginning July 1), including economic growth, borrowing from the central bank and fiscal deficit target. The review will help pave the way for the approval of a third tranche from the IMF worth about $850 million. The IMF board is likely to meet in early July for final approval.
Sources said that names of main buyers of T-bills; amounts sold and cut-off rates of the outgoing fiscal year; details of currency composition of the SBPs foreign assets and its liabilities as of end June 2007, end June 2008, end May 2008; and government deposits in banks and non-bank financial institutions have been demanded by the IMF.
Sources said that IMFs resident mission has also requested the Finance Ministry to provide data of Central Directorate of National Savings (CDNS) on debt stock by National Saving Schemes (NSS) instrument, prize bonds and PLI, SBP data on permanent debt and floating debt by instrument, AGPR data on debts stocks related to the GP Fund and public account deposits and SBPs data on government deposits with the non-banking financial institutions (NBFIs).
Sources said that IMF has set a condition that the government must lay out a plan for auditing electricity sector debt before it will be assumed by the government.
According to sources, the government will also provide a schedule to the IMF mission about the drafting and submission to the Parliament of the amendments to the National Electric Power Regulatory Authority (Nepra) Act that are necessary to ensure regular automatic electricity tariff adjustments based on Nepra calculations.