News Analysis: Prolonging caretaker setup could pose risk to IMF agreement

ISLAMABAD: The risks attached to the short-term $3 billion Standby Arrangement (SBA) program of the IMF will multiply manifold with the possibility of an extension in the tenure of caretaker setup after the approval of the 7th Population and Housing Census.

In the wake of the delimitation exercise going to be undertaken after the CCI approval and notification of the official gazette of the first-ever digital population census, a delay in the elections is on the cards beyond three months.

The delimitation exercise requires four months while two months more are needed to accomplish the election process.

In the existing circumstances, the tenure of the caretaker regime might have to be extended up to six months at least to complete the process of political transition.

Meanwhile, the Cabinet Committee on Energy (CCOE) has approved the revised Circular Debt Management Plan (CDMP) which, after getting approval from the federal cabinet, would be shared with the IMF.

It has been envisaged under the revised CDMP that the quarterly tariff adjustments and fuel adjustments would be charged from consumers in a timely manner after raising the baseline tariff. There would be no untargeted subsidy for any sector.

When a top government official was contacted, he said the CCOE had granted its approval and it would be shared with the IMF after getting the cabinet’s endorsement.

When asked if the revised CDMP was planned to be shared with the IMF by the end of July 2023, the official said they did not miss any major deadline and it would be shared soon.

It is yet to be seen how the IMF will respond to the revised CDMP on the envisaged targets because first, agreement on the targets and then implementation on it will ensure to restrict the monster of circular debt within agreed limits for the current fiscal year. Now on the IMF front, when the SBA program of $3 billion was designed, it was envisaged that it would be completed during the tenure of three different governments.

The first installment of $1.2 billion was already released during the tenure of PDM-led regime. It was thought that the first review would be undertaken on the basis of first quarter (July-September) data of different sectors of the economy with possibility of Fund dispatching its review mission to Islamabad in the third week of October. If all targets were materialized, then the IMF’s Board might consider approval of second tranche of $700 million in December 2023. It was also envisaged that the second review might be undertaken in February 2024 and the SBA program would be accomplished in March/April 2024.

With the possibility of an extension in the tenure of caretaker setup, the responsibility for materializing all structural benchmark, performance criteria and indicative targets might be lying with the caretaker government and there might be strict monitoring of all the key targets undertaken by the IMF mission. The full implementation of the IMF program of SBA is essential in order to graduate for the ongoing program and then qualify for another medium-term program of the Fund beyond March/April 2024 in order to remove the vulnerabilities faced by Pakistan on repayment of external loans.