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Pak-IMF review meeting

IFIs concerned over implementation of power sector reforms

By Sajid Chaudhry


ISLAMABAD: The implementation of power sector reforms agreed with the International Financial Institutions (IFIs) will prove to be difficult to tackle at the ongoing Pak-IMF review meeting as Pakistan has met all the performance benchmarks set by the IFIs, official sources said.

Any deviation from the implementation of the said agreement would result in increase in the power tariff subsidy level of Rs 55 billion agreed with the IMF authorities and this would be a direct violation of IMF guidance under $7.6 billion Stand-By-Arrangement and $3 billion Augmentation.

Delay in increase in power tariff under the said agreement would also result in increase in budget deficit target of 4.5 percent agreed with IMF authorities excluding IDPs expenditures. IMF had earlier assisted Pakistan, World Bank and Asian Development Bank to agree and than implement the power sector agreement in a manner acceptable to WB and ADB. World Bank in its recently issued Pakistan Economic Update has expressed its serious concerns over non-implementation of this agreement. IMF authorities always give weight to the concerns of other lending partners of Pakistan as IMF has the authority to issue letter of comfort for each new loan that Pakistan intends to negotiate with WB and ADB, sources added.

World Bank is already finalising three year Pakistan Country Assistance programme and dispute over the implementation of power sector reforms agreement might hurt the process, said the sources.

Secretary Finance, Salman Siddique is leaving for Dubai to participate in the ongoing Pak-IMF economic review and performance of Pakistan under agreed performance benchmarks agreed at Istanbul meeting. Federal Minister for Finance Shaukat Tareen will reach Dubai by November 10 to take part in policy level talks with IMF authorities.

According to the official sources, recently carried out legislation process by the government and the proposed approval of austerity measures at federal and provincial level would help government secure $1.2 billion tranche from International Monetary Fund.

National Assembly Standing Committee on Finance has also approved Banking Companies (Amendment) Bill 2009. Passage of Banking Companies Amendment Bill 2009 was a pre-condition of the IMF and the government has the attention to get it passed from the parliament before November 12 so that the next tranche of $1.2 billion is ensured at the ongoing Pak-IMF review meeting at Dubai. National Assembly Standing Committee on Finance has also approved Anti-Money Laundering Bill 2009, as the passage of this bill was one of the pre-condition of Asian Development Bank under its Pakistan’s Economic Transformation Programme.

With the initial approval of amendments in the Anti-Money Laundering Ordinance, 2007, Pakistan has met one of the major international obligation. Financial Action Task Force (FATF) and Asian Pacific Group (APG), which are responsible for monitoring compliance of AML and Combating Financing for Terrorism (CFT) regime by member countries, raised serious reservations on certain provisions of ANL Ordinance, 2007. This required necessary review and changes in the law to bring it inline with international standards. FATF and APG has issued final notice to Pakistan to enact revised legislation based on international standards by February 2010. With the approval of Anti-Money Laundering (Amendment) Bill 2009 Pakistan has met this deadline well ahead of schedule.

Federal Cabinet in its special meeting on Wednesday deferred the consideration of Austerity Policy till its next meeting that is likely to be held on November 11, official sources said. The Committee on Austerity Policy has already suggested to the federal cabinet that government resources would be saved if Saturday and Sunday weekly off are adopted from December 1, 2009 onwards. The austerity committee has also suggested strict restructuring of state owned enterprises that includes PIA, Railways, WAPDA, National Highway Authority and Pakistan Steel Mills. The restructuring includes cost cutting measures in these loss making state owned corporations and improving their productivity, this measure would help saving around Rs.200 billion per annum. FBR has met all three key parts of performance criteria set by IMF.

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