Pakistan: Risks attached to IMF increases if caretaker setup extended

Pakistan Shehbaz Sharif IMF International Monetary Fund

The risks attached to the International Monetary Fund’s billion Standby Arrangement (SBA) program to Pakistan will increase as the tenure of caretaker can be extended after the approval of the digital census, The News International reported. 

After the Council Common Interests (CCI) meeting “unanimously” approved the digital census 2023 on Saturday, the election is expected to delay which means that caretaker tenure will also extend. 

In the existing circumstances, the tenure of the caretaker regime might have to be extended up to six months at least to complete the process of political transition.

Meanwhile, the Cabinet Committee on Energy (CCOE) has approved the revised Circular Debt Management Plan (CDMP) which, after getting approval from the federal cabinet, would be shared with the IMF, as per The News International.

It has been envisaged under the revised CDMP that the quarterly tariff adjustments and fuel adjustments would be charged to consumers in a timely manner after raising the baseline tariff. There would be no untargeted subsidy for any sector.

When a top government official was contacted, he said the CCOE had granted its approval and it would be shared with the IMF after getting the cabinet’s endorsement.

When asked if the revised CDMP was planned to be shared with the IMF by the end of July 2023, the official said they did not miss any major deadline and it would be shared soon.

IMF has yet to reply to the revised CDMP on the envisaged targets because first, agreement on the targets and then implementation on it will ensure to restrict the monster of circular debt within agreed limits for the current fiscal year, according to The News International.

Now on the IMF front, when the SBA program of USD 3 billion was designed, it was envisaged that it would be completed during the tenure of three different governments. Accordingly, USD 1.2 billion was already released by the Pakistan Democratic Movement-led regime. 

It was thought that the first review would be undertaken on the basis of first quarter (July-September) data of different sectors of the economy with the possibility of the Fund dispatching its review mission to Islamabad in the third week of October. If all targets were materialized, then the IMF’s Board might consider approval of a second tranche of USD 700 million in December 2023. It was also envisaged that the second review might be undertaken in February 2024 and the SBA program would be accomplished in March/April 2024.

But as the caretaker PM’s tenure is expected to extend then the responsibility for materializing all structural benchmarks, performance criteria and indicative targets might be lying with the interim government and there might be strict monitoring of all the key targets undertaken by the IMF mission.

Even now the Pakistan National Assembly had passed a bill which gives additional power to the caretaker PM including taking important decisions on the economy and engaging with international institutions. This passing of the bill also somehow hints that the caretaker PM’s tenure is set to extend. 

The full implementation of the IMF program of SBA is essential in order to graduate from the ongoing program and then qualify for another medium-term program of the Fund beyond March/April 2024 in order to remove the vulnerabilities faced by Pakistan on repayment of external loans, The News International reported.

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