Pakistan exits IMF programme by end September

Islamabad

Pakistan will formally exit from the IMF programme by the end of the ongoing month as the Fund’s Executive Board is scheduled to meet at Washington DC on September 28, 2016, for approving last tranche of $102m under $6.4b Extended Fund Facility (EFF), The News has learnt.

“Yes, the IMF’s Executive Board will meet on September 28 for approving completion of 12th review and release of last tranche worth $102m. It will be first time in the country’s history when Islamabad will formally say goodbye to the IMF after successful completion of the whole Fund programme,” confirmed official sources while talking to The News here on Monday.

The government has implemented the IMF’s demand to slash down its borrowing from commercial bank as prior agreed action requiring for making adjustments on net domestic assets (NDA) for last couple of months that would now pave the way for releasing last tranche worth $102m and successful completion of Fund sponsored $6.4b programme on September 28, 2016. After approval of the Fund’s executive board, the last tranche will be released till September 30, 2016.

Pakistani authorities had missed out NDA target for end June 2016 with slight margin and subsequently budget deficit target for 2015-16 also went up by of 0.3 of GDP, jacking up to 4.6 percent against fixed target of 4.3 percent of GDP for last financial year. 

When the IMF had provided bailout package in 2013, it was argued that the country’s external position as well as tax revenues and energy sector needed to be fixed in order to achieve sustained growth. The foreign currency reserves were built up that created buffer to avoid external shocks under the IMF programme. 

In order to avoid rapid depletion of foreign currency reserves, the government will have to focus upon twin deficits especially on external account for which the government will have to boost up exports in the range of $5b to $7b under the emergency plan and keeping external liabilities under control on medium to long term basis. 

The tax revenues remained a problematic area as number of tax filers crossed mark of one million but huge potential still remained untapped out of over 180m populations. The energy sector, where the government got breathing space in the wake of declined oil prices, still required improving structural bottlenecks, otherwise, when the fuel prices would start escalating if the energy mix was not changed another crisis would surface again and hit us severely.

Although, Pakistan is going to say goodbye to the IMF, but the Fund staff would continue consistent biannual monitoring under the post programme monitoring (PPM) mechanism because Islamabad availed more resources under the EFF arrangement than its allocated envelop share. 

Without undertaking critical reforms in taxation, energy and boosting exports, apprehensions exist that the country might again knock the IMF door for another bailout package around financial year 2018-19 when external liabilities would start mounting in months and years ahead.