ISLAMABAD: A staff mission of the International Monetary Fund (IMF) on Thursday started consultations with Pakistani authorities on the exchange of economic data and future economic policies that may ultimately lead to a possible balance of payments support programme.
Informed sources said the delegation, led by Herald Finger, IMF’s senior economist, had separate meetings with Finance Minister Asad Umar and a team led by Finance Secretary Arif Ahmed Khan. The mission will stay here until Oct 4.
No official word was available from the IMF or the government side while the finance minister did not return calls for comment. Sources, however, said that the two sides would complete consultative sessions on macroeconomic indicators, particularly the most challenging energy-sector problems, details of the China-Pakistan Economic Corridor (CPEC) and the PTI government’s plans for structural reforms including the privatisation of bleeding public-sector enterprises.
Privatisation plans at the heart of the discussion
The authorities have been indicating financing needs of around $8-9 billion for the current year but are still unclear how much support could materialise from the friendly governments of China and Saudi Arabia.
“You may consider them pre-programme engagements”, said a senior official, but hastened to add that the leadership has not yet decided if the IMF programme is really required or not.
At the heart of discussions would be the government’s privatisation plan as the previous government could not make reasonable progress on the divestment of loss-making entities. The Pakistan Steel Mills, Pakistan International Airlines, two gas utilities, gas producers — OGDCL and PPL — and power sector entities were the most crucial items on the privatisation list, the official said.
Informed sources said the IMF mission was seeking details of the CPEC programme, particularly those relating to energy-sector projects, projects that had been completed and those in the pipelines with completion timelines. “They obviously want to know the financing modalities, particularly repayment schedules, along with details of revolving funds and guarantees given to Chinese power-sector sponsors for timely payments against power purchases,” the official said in respond to a question.
The mission has also sought details from the government, particularly the power and finance divisions, about the proposed steps to ensure full cost recovery from consumers and if not, how to bridge the gap given limited space in the budgetary allocations. “We have not yet reached that stage but would share with them the upcoming tariff increase currently on the agenda of the government to generate around Rs200bn”, the official said. He conceded that the total circular debt was around Rs1.2trillion including the fresh flow of Rs640bn and old stock of about Rs560bn, and the upcoming tariff increase would be an insufficient measure. The major worry for the fund is not the current stock but the future strategy to block its recurrence, the sources said.
The finance and power division would be required to share the latest data on new arrears and its breakdown including line losses, non-recoveries, refunds held by the tax authorities on account of GST, accrued mark-up on non-payments on the one side and loan repayments and rollovers on the other, justifiable reasons for delays in tariff notification due to litigation, and how outstanding stock of Rs1.2tr would be settled.
The government’s technical teams comprise the finance secretary, the governor of the State Bank of Pakistan, the chairman of the Federal Board of Revenue, assisted by the secretaries of the privatisation, power and petroleum divisions. Finance Minister Umar will lead the policy-level discussion and wind up the consultations by Oct 4.
The minister is expected to engage with the IMF leadership on the sidelines of the annual meetings of the IMF and the World Bank scheduled for Oct 8-14 in Bali, Indonesia, for a final future course of action.
Published in Dawn, September 28th, 2018