Prior to dispatching review mission: IMF asks for details of $16bn post-flood reconstruction plans

ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan for sharing more details for undertaking the post-flood reconstruction at the cost of $16 billion, prior to taking a decision to dispatch its review mission to accomplish the pending 9th Review under the Extended Fund Facility (EFF) programme.

However, the IMF did not give any confirmed date for the completion of the 9th Review but the Pakistani side asked for kick-starting policy-level parleys within the ongoing month.

Keeping in view the jittery markets, the IMF and Pakistani side decided to continue the exchange of data in the coming days, and then possibilities will be explored to complete the ongoing review. The Ministry of Finance claimed that the IMF agreed to allow adjustment for spending related to the flood-affected area during the phase of rehabilitation and reconstruction.

In crux, Pakistan and the IMF decided to continue the exchange of data with renewed efforts for completion of the ongoing review and release of $1 billion tranche within the first half till the end of December 2022 of the current fiscal year. One top official said that the Pakistani side discussed the possibility of a mini-budget on account of slapping windfall gain tax on lofty profits earned by the banking sector through alleged manipulation of the exchange rate.

Top official sources of the Finance Division confirmed to The News that the IMF showed its willingness to send its review mission, once provided additional information on the reconstruction of floods. The IMF was told that the Earthquake Reconstruction and Rehabilitation Authority (ERRA) undertook reconstruction work for several years in the aftermath of 2005 earthquake and then floods struck in 2010. The reconstruction work of the 2022 floods might continue for several years, so the question of utilising $16 billion in one year does not arise.

“Our primary deficit has been restricted within the envisaged limits of the fixed surplus target; however, the overall deficit might escalate mainly because of increased flood-related expenditures,” said the official. The government also assured the IMF that the joint sitting of parliament would be convened for approving the State Owned Enterprises (SOEs) law 2022.

On external financing needs of $32 to $34 billion, the IMF was told that the Pakistani side got assurances for getting deposits, additional deposits, jacking up the SWAPS agreement and oil facility on deferred payments to the tune of $13 billion. The remaining amounts on the external financing front will be managed successfully, they added.

According to an official statement issued on Thursday night by the Ministry of Finance, Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar held an online meeting with Nathan Porter, IMF Mission Chief for Pakistan.

The two sides discussed the progress made with the ongoing IMF programme, particularly the impact of floods on the macroeconomic framework and targets for the current year.

The IMF indicated its willingness to sympathetically view the targeted assistance for the poor and vulnerable, especially flood affected.

It was agreed that expenditure estimates for flood-related humanitarian assistance during the current year will be firmed up along with estimates of priority rehabilitation expenditure.

In this regard, engagement at the technical level shall be expeditiously concluded for proceeding with the 9th Review. “Finance Minister Senator Ishaq Dar reiterated GOP’s commitment to successfully completing the IMF programme,” the statement concluded.