ISLAMABAD - Pakistan has assured the International Monetary Fund to fully eliminate electricity subsidies before June 30 this year under the Standby Arrangement, working out a plan to address the circular debt issue, the Fund's review mission said on Wednesday. Structural reforms have progressed broadly as envisaged, the Fund observed, adding that a contingency plan for handling problem of banks has been prepared and is being strengthened; an action plan to reform tax policy and administration has been adopted and will be implemented with technical assistance from the IMF and World Bank; electricity subsidies will be fully eliminated by the end of the current fiscal year; and a plan has been designed to address the circular debt issue. An IMF staff mission, led by Adnan Mazarei, visited Islamabad and Dubai over the past 12 days to conduct the 2009 Article IV consultation and the first review under Pakistan's SBA. On conclusion of its work, the mission in its statement said, "The IMF mission staff will prepare a report for the IMF Executive Board on the first review under Pakistan's SBA and the 2009 Article IV consultation that is scheduled for consideration in late March." The IMF mission held extensive discussions with government and central bank officials. These discussions focused on Pakistan's recent economic performance, the main challenges lying ahead, and the policies needed to build and consolidate macroeconomic stability in the light of uncertain and deteriorating global economic environment. The authorities' programme remains on track. Initial developments since the approval of Pakistan's IMF-supported programme have been generally positive, and all the programme's quantitative performance criteria for end-December 2008 were observed. The exchange rate has remained broadly stable and the international reserves position has strengthened significantly (the State Bank of Pakistan's (SBP) gross foreign exchange reserves exceeded US$6.8 billion at end-January, excluding reserves of commercial banks). There has also been a strong positive response from the T-bill market to the 200-basis point increase in the central bank discount rate in mid-November, allowing the government to retire some of its debt to the SBP. "The deterioration in the global economic environment and weaker economic activity call for an update of the economic framework and a recalibration of economic policies. In particular, discussions focused on the fiscal programme and the monetary policy stance," the statement said. On the fiscal side, the discussions resulted in understandings on measures to assure the achievement of the programme's fiscal targets for 2008/09 (July-June) and 2009/10 through mobilization of revenue and some expenditure rationalization. "The authorities and the IMF staff team agreed that the current monetary policy stance was appropriate and will continue to promote domestic and external stability. Looking ahead, they agreed that, if both headline and core inflation decline, there should be scope for lower rates, provided that the international reserves position continues to improve and the government avoids resorting to SBP financing. IMF showed satisfaction over the resolve of the Pakistani authorities as well as the initial success in stabilizing the economy augurs well for the future, despite the risks associated with the deterioration in the global economy. Mobilization of additional external budget assistance is particularly crucial now in order to support the broadening of the social safety net and a higher level of development expenditure. The Donor Meeting that is expected to take place in March/April provides an important opportunity for the international community to support Pakistan's efforts in stabilizing its economy, mobilizing more resources for social protection, and laying the basis for a high and sustainable growth.