The government is likely to seek another bailout package of more than $ 5 billion from the International Monetary Fund (IMF) but its approval will hinge upon the support from the United States as well as on the implementation of agreed reforms in the revenue and power sectors.
An official source said that there was no option available but to re-approach the IMF for another bailout package. However, he said Pakistan would have to show significant improvement in revenue and power sectors reforms otherwise the IMF would consider the government not serious about reform.
He said the support of US was essential to get a favourable new programme from the IMF since the IMF was likely to impose stringent conditions without US support. He said official circles and experts feel the government’s financial team wasted an ideal opportunity since the last loan provided by the IMF came with the softest terms ever offered to Pakistan.
About the chances of US support, he said that the tensions between the two countries were a matter of concern but the US had not indicated it would not help in civilian affairs.
It is Pakistan own desire to remain under an IMF programme to retain the confidence of the international community in its economy. Other international financial institutions (IFIs) and western governments look to IMF reports to decide whether to provide financial assistance to a country. The US and UK had publically asked the government to tax its rich for additional resource mobilization.
The government is aiming to seek a new programme in September before the expiry of the existing programme which remains suspended since May last year. The government was hoping to secure the release of the remaining two tranches after the reviving the programme as an IMF mission was due in July to hold formal review of the economy before deciding on the release of the next tranche.
However, clumsiness in finalising revenue collection figures resulted in a fiasco that lead to the resignation of State Bank of Pakistan governor Shahid Kardar that buried the chances of the programme’s revival. However, the source said that despite the figure fudging fiasco at the Federal Board of Revenue (FBR), the things were moving in the right direction as the FBR had managed to collect Rs 105 billion in revenue during the first month (July) of the current fiscal year.
The real worry for the government, he said, remains power sector reforms on which little progress was been made during the last fiscal year.
The government increased the power tariff but failed to improve management practices at public sector distribution and generation companies that resulted in a failure in the implementation of the reforms.
The ministerial committee on energy would form the basis of convincing IMF of Pakistan’s commitment to power sector reforms. For the first time, the committee was presented with the complete picture on issues, impact and reforms in the power sector on short to long term basis. Its recommendations shall be shared with the fund to finalise the next bailout package, the source said.
