Structural Benchmarks under Discussion with the IMF

Discussions are underway with the International Monetary Fund (IMF) on the timing of the adoption of politically demanding structural milestones, in particular power sector reforms, tax reforms and amendments to the Nepra and SBP acts.

A newly named senior spokesman for the Ministry of Finance, Kamran Ali Afzal, said this during a brief interaction with selected top reporters. The release of the second tranche under the Extended Fund Facility (EFF) of $6 billion remains at risk until the second quarterly mandatory review agreement is reached with the IMF.

Furthermore the Speaker agreed that amendments to the Acts of the National Electric Power Regulatory Authority (NEPRA) and the State Bank of Pakistan (SBP) may constitute prior actions to revive the IMF programme, adding that a missed structural benchmark becomes a prior action unless the Fund grants a waiver.

He further argued that, despite an increase, subsidies to the power sector and tax mobilisation will be other areas of concern to the government during negotiations with not only the IMF, but also other development partners. Furthermore the Special Speaker pointed out that all development partners – the IMF, the World Bank and the Asian Development Bank – are struggling with untargeted subsidies and have asked the country to devise a strategy to ensure that the required subsidies are issued.

In the wake of Covid-19, the development partners have frontloaded their assistance in the pipeline for Pakistan and now the country is on track with regard to the Asian Development Bank (ADB) board meeting that would consider Pakistan’s $300 million trade and competitiveness sub-programme-II, the senior spokesman said.

Although the second wave of Covid-19 has made things difficult, we are moving towards an agreement, the official said adding that there was a significant increase in cement and steel sales as well as growth in LSM with positive signs of recovery, but nothing can be expected with regard to GDP growth, he said.

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