The Executive Board of International Monetary Fund (IMF) is scheduled to meet in Washington DC on Wednesday. Its agenda includes release of $1.2 billion fourth tranche to Pakistan under the Stand-By Arrangement (SBA) facility. The IMF Board will consider the third Review under the Stand-By Arrangement concluded between Pakistan and IMF team in Dubai during November 2-12 for approval.
"Pakistan hopes that the Board approves the review and the money is disbursed by December 31," sources said. "IMF is satisfied with the performance of Pakistan's economy in the current fiscal year," sources said, adding that release of the fourth tranche is critical to meeting Pakistan's foreign exchange needs and the fiscal deficit targets.
Pakistan missed the fiscal deficit target for July-September by 0.3 percent because of advance payment of salaries amounting to Rs 35 billion in September ahead of Eid-ul-Fitr. The explanation was accepted by IMF team, sources added. A Finance Ministry official, who attended the Dubai meeting, said that the IMF team had expressed dissatisfaction over delay in implementation of power sector reforms and circular debt.
Power and oil sectors are still facing problems of circular debt. PSO receivables against different clients stood at over Rs 77 billion on December 18, against payables of over Rs 50 billion to oil refineries on account of fuel supply. The government is set to raise power tariff, by over 13.5 percent, from January 1, 2010 on account of fuel adjustment as well as to clear the backlog of tariff differentials.
As per the plan agreed with the Asian Development Bank (ADB) and the World Bank, the government would increase power tariff by 12 percent and an additional 1.5 percent on account of fuel adjustment, pending since November. In the second LoI, submitted to the International Monetary Fund (IMF) on March 16, 2009, the government of Pakistan had submitted a plan to eliminate the inter-corporate debt in the energy sector.
As a first step, Pakistan Electric Power Company (Pepco) issued government-guaranteed term financing certificates (TFCs) to settle the amounts it owed to banks and suppliers. The government said that in collaboration with the World Bank it had finalised a schedule for electricity tariff adjustments to eliminate tariff differential subsidies by the end of June 2009. But the subsidy continued till October; it would be eliminated on April 1, 2010, sources added.
The government is also likely to miss its target of providing social safety net to cover 5 million families under Benazir Income Support Programme (BISP) during the current financial year 2009-10. Finance Ministry officials anticipate utilisation of around Rs 50 billion against the budgetary allocation of Rs 70 billion due to replacement of existing cash distribution mechanism with the new scorecard system supported by the World Bank.