ISLAMABAD: The failure to secure confirmation on external financing and a lack of clarity on releasing the Governance and Corruption Diagnostic (GCD) Assessment report proved to be stumbling blocks to reaching a Staff Level Agreement (SLA) between Pakistan and the International Monetary Fund (IMF).
Of the nine tables under the Memorandum of Economic and Financial Policies (MEFP), those concerning the Balance of Payment (BoP) and external financing needs remained unsettled. These tables would now be finalised in the coming week. Secondly, the GCD assessment report is a structural benchmark that has yet to be released, top official sources confirmed to ‘The News’ on Thursday. Thirdly, as flood damage assessments are still evolving, the IMF is awaiting final estimates.
This correspondent made all-out efforts to get an official viewpoint, but the Ministry of Finance high-ups preferred to remain silent. However, officials expressed the hope that the outstanding issues would be settled in the coming weeks, allowing an SLA to be reached within the next 7 to 15 days if both sides resolve the issues amicably.
Minister for Finance Muhammad Aurangzeb had told a select group of reporters on Wednesday evening that talks with the IMF had been productive and that signing the SLA was just a matter of time. The sources said the IMF mission sought confirmation from multilateral and bilateral creditors regarding the BoP and external financing, as the current account deficit may increase further.
Interestingly, the IMF issued its statement in the early hours of Friday, following the visiting team’s departure from Islamabad. According to the statement issued from Washington, an IMF team, led by Iva Petrova, visited Karachi and Islamabad from September 24 to October 8, to hold discussions on the second review under the Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF). At the conclusion of the discussions, Petrova issued the statement, clarifying that the statements in End-of-Mission press releases convey the preliminary findings of IMF staff teams after a visit to a country. These views are those of the staff alone and do not necessarily represent the views of the IMF’s Executive Board. Furthermore, this mission will not lead to a discussion by the Board.
The statement read: “The IMF mission and the Pakistani authorities made significant progress toward reaching an SLA on the second review under the 37-month Extended Arrangement under the EFF and on the first review of 28-month Arrangement under the RSF.
“Programme implementation remains strong, and broadly aligned with the authorities’ commitments. Significant progress was made in the discussions in several areas, including sustaining fiscal consolidation to strengthen the public finances while providing needed flood recovery support; ensuring inflation remains durably within the SBP’s target range by maintaining an appropriately tight and data-dependent monetary policy; restoring the viability of the energy sector by implementing regular tariff adjustments and cost-reducing reforms; and advancing structural reforms to reduce the footprint of the state, strengthen governance and transparency, foster a more competitive business environment, and liberalise commodity markets. Productive discussions were also held on the authorities’ reform agenda to strengthen climate resilience, including the completion of reform measures under the RSF.
“The IMF team and the authorities will continue policy discussions with a view to settling any outstanding issues. “The IMF team wants to express its sympathy to those affected by the recent floods, and is grateful to the Pakistani authorities, private sector and development partners for many fruitful discussions and their hospitality throughout this mission,” the IMF statement concluded.
Pakistan and IMF could not evolve a consensus on contingency taxation measure in case of exceeding revenue shortfall in the second quarter of current financial year.
The IMF opposed a levy on imported luxury items while the FBR was not comfortable for jacking up tax rates on fertilizer and pesticides. Now the Ministry of Finance and FBR will propose contingency taxation measures for striking a staff level agreement.
Read more on The News International
