IMF links giving aid to reformed GST legislation

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ISLAMABAD: The International Monetary Fund (IMF) team on Wednesday linked the release of next tranche of $1.7 billion with the presentation of draft legislation on the reformed general sales tax (RGST) in the national and provincial assembles prior to the next IMF board meeting.
Annoyed with the non-implementation of the reforms in the power sector and the reformed GST, the International Monetary Fund (IMF) has stressed upon the government to give a clear implementation plan on both issues to be eligible for the next tranche of $1.7 billion.
Official sources said the visiting IMF team had extended its stay for two days and the final policy-level talks with the government’s economic team would take place on Friday. The visit was extended because the IMF team wanted substantial commitments from the government on the power sector reforms and implementation of the reformed GST.
During the first round of discussions, the IMF team was not satisfied with the implementation on the commitments and demanded a clear roadmap to implement reforms in the power sector, as well as the strategies to increase revenue, the sources said.
After the completion of the review, the IMF team will present its performance-based report to the executive board, and if satisfied, the board will approve the release of the next tranche. The 25-month $11.3 billion Stand-By Arrangement (SBA) was approved by IMF in November 2008 and is set to end in December 2010.
The next IMF programme that Pakistan intends would limit around the actual releases of the current facility, the sources said. The IMF team stressed immediate elimination of power sector inter-corporate circular debt, which it termed as the main stumbling block in the smooth functioning of the system.
The government side committed that the power tariff would be increased 2.2 percent each month to reduce the Rs 20 billion per month differential in the power generation cost and consumer tariff.
However, the IMF team was of the opinion that the monthly hike in power was not a viable solution in the long term. IMF stressed that the government must draw a clear cut implementation plan centering on the resolution of the circular debt issue, bringing energy efficiency, holding energy audit and autonomy to distribution companies.
On the fiscal side, IMF stressed retaining the fiscal deficit at the pre-floods budgetary level of four percent.
The sources said the government was already in a tight position, as it had not received $1.4 billion dues under the Coalition Support Fund from the US, on which the budgetary estimates were based.
IMF gave a favour that Pakistan could submit its additional expenses due to floods under a separate head, but fiscal deficit should remain as per the budget.