ISLAMABAD - Pakistan has not yet decided when to approach International Monetary Fund (IMF) for a fresh bailout package to improve its balance of payment situation, sources said on Saturday.
“There will be need to approach IMF within this fiscal year to improve balance of payment situation, but timeframe in this regard has not so far been finalised as political leadership will make any decision about the timing,” said an official of the Finance Ministry on the condition of anonymity.
Meanwhile, showing dissatisfaction over the power sector reforms, the International Monetary Fund (IMF) has sought a detailed report from the Ministry of Water and Power on reform measures to control the line losses and recovery of dues.
Sources aware of the development said the IMF had expressed dissatisfaction over the performance of power sector as the entire subsidy allocated to the power sector had been consumed in the first half (July-December) of the ongoing financial year 2012-2013 and progress in terms of recovery was very dismal and total outstanding recoveries had ballooned to Rs 430 billion. Sources said IMF noted that the country’s budget deficit would go beyond the target of 4.7 per cent of the GDP during the financial year 2012-2013 if current pace of releasing subsidy continued for the power sector during the remaining six months (January-June).
“We will give detailed presentation to the IMF team on Monday on the reform measures taken in the power sector and also on line losses and recovery of dues during the last year,” said an official of the Ministry of Water and Power, while talking to The Nation on Saturday.
Pakistan and IMF have been holding technical level talks in Islamabad under Post-Programme Monitoring for January 8, which would end on January 14 and policy-level dialogue would be initiated from January 15. Post-Programme Monitoring mission of the IMF reviews the Pakistan’s capacity to repay the loans after every six months. Pakistan would present the next three years’ proposed economic framework projections with the IMF authorities during the policy-level dialogue.
Sources said Pakistan’s economic team is trying to satisfy the Fund authorities to ensure favourable assessment of economy by the IMF authorities at the conclusion of these talks, as Islamabad has no other option during the year 2013 due to the depleting foreign exchange reserves.
Pakistan’s foreign exchange reserves are under severe pressure due to repayment to the IMF as Islamabad has repaid $ 2.5 billion to the Fund since 2008 while it has to further repay $ 1.7 billion before June 30 2013. The country’s total liquid foreign reserves by December 28 decreased to $13.808 billion from $ 18 billion during the last 18 months. On the other hand, Pakistan is not optimist about the inflow of $ 1.6 billion under the head of auctioning 3G licences and the amount due from Etisalat against privatisation of PTCL.
The government has kept $850 million auction of 3G in the current fiscal year and disbursement of $800 million by Etisalat for privatisation of PTCL in the budget 2012-2013. Therefore, Pakistan has no option except approaching IMF for fresh bailout package.
The IMF has already shown dissatisfaction over some economic targets set by the government for the current financial year 2012-2013 during the ongoing technical talks.
The IMF noted the other day that Pakistan could not achieve the revenue collection target, GDP target and inflation rate target during the current financial year.
Similarly, the Fund noted that Pakistan was unlikely to achieve the fiscal deficit target of 4.7 per cent due to low revenue collection and huge power subsidy. Similarly, it has estimated that inflation will remain in double digit and will be around 11 percent in the on-going fiscal year due to heavy borrowing of the government to finance the budget deficit against the government target of 9.5 per cent.