By By Mehtab Haider
“What is important for Pakistan, of course, is that not just the Fund but that other donors do make good on their promises to support the country,” Caroline Atkinson, Director External Relations IMF, stated.
The Friends of Democratic Pakistan (FODP) had pledged $5.28 billion in a Tokyo conference held in April 2009 while economic managers in Islamabad presented the budget in June on uncertain assumptions of getting $2 billion in the ongoing fiscal.
If the projected inflows do not come within the desired period, the economic managers will face an uphill task to stick to the budgetary targets during the ongoing fiscal year.
On the issue of power sector subsidy, the government officials say that Pakistan made commitments with the World Bank and the Asian Development Bank to increase power tariff by almost 24 per cent by August 2010.
The government has already raised electricity tariff by six per cent in October but the implementation of the second phase of 12 per cent tariff increase by January 2010 and so on in April 2010 would be a hard nut to crack for the democratically-elected regime.
The IMF in August gave Pakistan extension of a year to eliminate electricity subsidies. Now the IMF says two tariff increases will be implemented. Others say this is not possible politically.
When the spokesperson was asked about the IMF’s thinking on power pricing in Pakistan, she said that the issue of electricity subsidies was primarily being dealt with by the World Bank and the Asian Development Bank.
“This is a sectoral issue that is typically done by those in development — they have more expertise. We are interested in particular — we get involved in particular through the implications on the budget.”
“And, we also will be having another review of the Pakistan’s programme in early November, and I am sure different issues will be looked at then,” she concluded.
However, official sources in Finance Ministry said that the next review talks scheduled from November 2 to 11 at Dubai could prove tough negotiations for Pak economic managers. But the economic managers seem comfortable for having support of USA in the Executive Board of Fund despite missing some key performance indicators in first quarter of the current fiscal year.
Pakistan will seek two waivers on performance criteria from the IMF for failing to materialise its envisaged fiscal deficit target and tabling legislation before the Parliament to harmonise the General Sales Tax and Income Tax laws.
The government had envisaged fiscal deficit target to the tune of Rs194 billion (equivalent to 1.3 percent of the GDP) for the first quarter which was hiked to Rs228 billion (1.5 percent of the GDP) till September 30, 2009.
Giving reasons for increased pressure on fiscal side, the sources said that the delays made by Obama Administration for reimbursement of Coalition Support Fund amounted to Rs42bn and payment of advance salary bill of Rs35bn on eve of Eid played key role in missing the fiscal deficit target. Moreover changes in advance tax laws resulted into delayed payment of Rs26bn, totalling the amount to over Rs100bn losses on the revenue side.