Govt appears confident ahead of SBA talks

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) would begin crucial discussions on first review of US$3 billion Stand-by-Arrangement (SBA) from tomorrow (Thursday) amid government’s claim that all the targets have already been met.

An official of Finance Ministry sounded confident about successful completion of the first review (July-September 2023) under $3 billion SBA.

However, external financing needs may come under sharp focus during the review, as the budgeted $4.5 billion loans from foreign commercial banks and $1.5 billion through issuance of Eurobonds for the current fiscal year have yet to materialise.

First review under SBA becomes due: Ministries spurred into action

The Monetary Policy Statement dated 30 October 2023 referred to “tepid official inflows during August and September” and emphasised the need for the “realisation of expected external inflows to create space for credit to private sector and improve the NFA of the banking system.”

Revenue collection in the first quarter of the ongoing fiscal year was higher than targeted, which indicates effective implementation of new tax measures. Sources added that substantial increase in net federal revenue, driven by a rise in non-tax revenue collection, inclusive of petroleum levy, reflects a positive trend in revenue performance.

When asked whether the country has achieved all energy-related targets, the caretaker minister for energy Muhammad Ali said that the ministry is on target in terms of gas and oil sector. The government increased gas and electricity tariffs to achieve full cost recovery and to arrest and reduce the circular debt of both the sectors.

The official added that as far as establishment of central monitoring unit for state-owned entities (SOEs) is concerned, a CMU has been established in the Finance Division and it is working on the preparation of performance reports of SOEs for the last three years. These reports are to be shared with the IMF during the second review scheduled for December 2023.

Sources further stated that State Bank of Pakistan (SBP) is on track with regard to the floor on net international reserves (NIR) of negative $14.5 billion in September 2023, adding that all the ministries and divisions have been asked to share the required data for onward submission to the Fund.

The review process will be conducted in two phases. Initially, technical talks will be held, which would be followed by policy-level discussions.

Business Recorder sent questions to the IMF Resident Representative in Pakistan Esther Perez Ruiz, as well as, to the Fund headquarter; however, till the filing of this report no response was received.

Copyright Business Recorder, 2023