Talks with IMF: Specific time-bound structural benchmarks not yet been finalized

Talks with the International Monetary Fund (IMF) mission are continuing, and specific time-bound structural benchmarks have not yet been finalized, so stated a number of senior officials from the finance ministry and federal board of revenue. Media reports may reflect a portion of the ongoing discussions however until and unless an agreement is reached on the entire bailout package, to give a precise figure of any conditionality agreed by the Pakistan authorities would be premature, sources added.
The IMF has a standard condition for a country that is projected to experience an unsustainable budget deficit of over 7 percent - over 7.6 percent according to some independent economists: raise revenue and/or reduce expenditure to bring the deficit down. Exactly by how much must the deficit would be reduced during the three years of the programme (or whether a portion is to be reduced as a prior condition) would depend on the ongoing negotiations. The IMF no doubt would seek a quicker reduction say of 2 to 3 percentage points in the first year with the Pakistani authorities seeking a lower rate so as not to compromise prospects of growth, according to sources.
If the government can convince the IMF team that it would reduce its expenditure by, say, 300 billion rupees in the next budget then the Fund''s demand for raising revenue would be adjusted downward accordingly.
Sources pointed out that the power sector has been suffering from governance issues and mismanagement and the circular debt has escalated to over 1.5 trillion rupees. For the Fund not to take this as part of the budget deficit for yet another year would mean stringent conditions including, as in the previous two Fund programmes approved in 2008 and 2013, raising tariffs to attain full cost recovery, which had implications on the quality of life of the public.
Media reports appear to be based on the framework presented by the IMF which is unlikely to be accepted in its entirety. It is unclear whether Pakistan''s three-year framework prepared during the tenure of Asad Umer as the finance minister is under consideration or whether Dr Hafeez Sheikh-led team is using the IMF framework as a base and attempting to trim down the politically challenging decisions as much as possible, sources further revealed.
But nothing is agreed till it is agreed, so stated several officials privy to ongoing discussions. Once the agreement is reached the government would proceed to announce measures agreed as prior conditions (possibly rise in utility tariffs) and inject the required amendments into the budget for next fiscal year.
The actual IMF agreement and the Letter of Intent (LoI) submitted by the Pakistani authorities to the IMF Board for formal approval of the package would be uploaded on the IMF website as per the Fund''s transparency policy. The Ministry of Finance has been uploading its LoI on its website during the last programme however these documents would be uploaded after the Fund''s Board approval unless the Ministry uploads its LoI sooner.