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ISLAMABAD: The International Monetary Fund has set four pre-conditions for continuing with Pakistans $11.3 billion standby arrangement (SBA) and withheld the release of two remaining tranches of $2.6 billion till the government meets the criteria.
The IMFs review, which was due in June this year, should have been followed by the release of a $1.3 billion tranche in July. The government did not meet the performance criteria set for the quarter (April-June 2010) and the review had to be delayed. It finally took place in Washington last month.
Under the original plan, the entire $11.3 billion loan under the SBA should have been completed before the end of this year.However, non-fulfilment of the performance criteria by the government on account of continuous breach of fiscal deficit limits for three quarters, non-implementation of value-added/reformed general sales tax with effect from July 1 and slower progress on the energy sector reforms has led to the stoppage of two tranches of $2.6 billion.
Informed sources told Dawn that during the recent talks in Washington, the IMF authorities had taken a very strong position and informed Pakistani officials that the programme would continue only after key measures agreed under the programme were adhered to.
The IMF has so far released $8.7 billion out of the $11.3 billion package.
In view of special circumstances arising out of the devastation caused by floods, the IMF, however, asked Pakistan to avail $450 million reserved for natural emergencies.
An official said Pakistan could have secured the emergency support through a simple letter, instead of spending a lot of time, energy and resources in the United States. He said the IMF had made it very clear that further talks on macroeconomic review and the release of remaining $2.6 billion could be held only after the government introduced reformed GST or VAT next month, as announced earlier.
Pakistani officials were also told that the IMF executive board would not be interested in considering Pakistans request for more funds unless it made tangible progress on power sector reforms, introduced changes in the SBP Act to give it more autonomy and resolved the emergence of a fresh circular debt arising out of commodity operations.
The sources said the provinces and the Trading Corporation of Pakistan had contributed heavily to the creation of about Rs400 billion of circular debt in commodity operations, raising fears that this might lead to a crisis-like situation for banks because of flood-related defaults.
A 17-member Pakistani delegation stayed in the United States for more than 10 days for talks with the IMF on a belated macroeconomic review. A few members of the delegation have stayed back after completion of the official visit to celebrate Eid with their families.
LINK
The IMFs review, which was due in June this year, should have been followed by the release of a $1.3 billion tranche in July. The government did not meet the performance criteria set for the quarter (April-June 2010) and the review had to be delayed. It finally took place in Washington last month.
Under the original plan, the entire $11.3 billion loan under the SBA should have been completed before the end of this year.However, non-fulfilment of the performance criteria by the government on account of continuous breach of fiscal deficit limits for three quarters, non-implementation of value-added/reformed general sales tax with effect from July 1 and slower progress on the energy sector reforms has led to the stoppage of two tranches of $2.6 billion.
Informed sources told Dawn that during the recent talks in Washington, the IMF authorities had taken a very strong position and informed Pakistani officials that the programme would continue only after key measures agreed under the programme were adhered to.
The IMF has so far released $8.7 billion out of the $11.3 billion package.
In view of special circumstances arising out of the devastation caused by floods, the IMF, however, asked Pakistan to avail $450 million reserved for natural emergencies.
An official said Pakistan could have secured the emergency support through a simple letter, instead of spending a lot of time, energy and resources in the United States. He said the IMF had made it very clear that further talks on macroeconomic review and the release of remaining $2.6 billion could be held only after the government introduced reformed GST or VAT next month, as announced earlier.
Pakistani officials were also told that the IMF executive board would not be interested in considering Pakistans request for more funds unless it made tangible progress on power sector reforms, introduced changes in the SBP Act to give it more autonomy and resolved the emergence of a fresh circular debt arising out of commodity operations.
The sources said the provinces and the Trading Corporation of Pakistan had contributed heavily to the creation of about Rs400 billion of circular debt in commodity operations, raising fears that this might lead to a crisis-like situation for banks because of flood-related defaults.
A 17-member Pakistani delegation stayed in the United States for more than 10 days for talks with the IMF on a belated macroeconomic review. A few members of the delegation have stayed back after completion of the official visit to celebrate Eid with their families.
LINK
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