The International Monetary Fund (IMF) would seek an explanation from Finance Minister Ishaq Dar and his team on the proposed package for textile sector, Rs 341 billion special farm package and as fraud in power sector revealed by NEPRA during the ninth mandated quarterly review under the Extended Fund Facility (EFF) scheduled for the end of the month.
The IMF official from Washington in response to some question by the Business Recorder stated "we are in the process of collecting information on any new spending plans and their impact on the budget".
The statement adds that "while the government defines its spending plans and priorities, it is important for any new packages to fit within the overall fiscal framework, ie to be consistent with debt sustainability and the authorities' budget deficit targets". "Understanding how any additional plans fit into the existing fiscal envelope and are to be financed will be important in that process. We plan to cover these and other issues with the authorities during the upcoming discussions on the ninth program review and Article IV consultations" the statement notes adding that "Pakistan has completed eight reviews under the program and received so far a total of SDR 3.24 billion (about $4.54 billion). Four quarterly program reviews and tranches remain and the undisbursed amount under the EFF is SDR 1.153 billion (about US $1.630 billion) at the current exchange rate".
The Fund Mission Chief to Pakistan Harald Finger during a conference call with media from Washington earlier this month said on the electricity sector, "Fund took note of the audit report that showed large scale fraud in the power sector. This is something that we need also to discuss in the context of the upcoming review. We think it's very important to make sure that governance is adequate in the sector and that we'll be able to gradually improve collections and greatly reduce the losses and the theft, and over time bring the sector to cost recovery which is quite important to bring and to stream the idle capacity that is now there.
"And that together with new supply that is going to come on stream over the next few years, then that will hopefully reduce quickly the amount of blackouts that we have now in the system and that is holding back - well, it's an inconvenience for consumers, so holding back growth, and together with the circular debt is a drain on public finances" stated Finger.
Sources said that planned privatisation may also come under scrutiny during the ninth review as the government would be unable to privatise Pakistan International Airlines (PIA) without amending PIA 1956 Act.
A member of PC Board told some media persons after a press conference of Chairman Privatisation Commission that amendment to this effect has been forwarded to Finance Minister Ishaq Dar for Prime Minister's approval which would then have to be tabled in Parliament. Analysts maintain that the passage of the amendment to the PIA 1956 Act may be a challenge for the government in the Senate where it lacks a majority.
The ninth mandatory review meeting is reportedly to be held from October 26 to November 4, 2015 in Dubai.
Sources in Finance Minister said technical level discussions would focus on sharing of data of different sectors of the economy ie revenue collection, expenditure, power sector, net domestic assets, government borrowing from SBP as well as financial sector etc. Technical level talk would be followed by policy level talks with the Pakistani delegation headed by be headed by Finance Minister Ishaq Dar along with Governor State Bank of Pakistan (SBP). Chairman Federal Board of Revenue (FBR) would also attend the talks.