ISLAMABAD, Oct 9: Pakistan is expecting $2.6 billion net exceptional financing from the international financial institutions (IFIs) during 2002-03.

Official sources said here on Wednesday that the net exceptional financing during the current financial year was expected to decrease as compared to last financial year and it was expected to stabilize at $2.6 billion.

Pakistan had received about $3.3 billion, mainly reflecting lower rollover of foreign deposits with the banking system in 2001-02.

The International Monetary Fund (IMF) has been informed by the Pakistani authorities that they have yet to conclude bilateral agreements with all the Paris Club creditors and are studying options to secure comparable treatment from other creditors.

Sources said that Fund officials had been informed that bilateral agreements with some countries including Japan were likely to be concluded by October this year. Japan alone has to reschedule its $5 billion debt as per the decision of the Paris Club. The United States has already rescheduled its $3.2 billion debts, out of which $1 billion were expected to be written off by the Bush administration after the approval by the US Congress.

The government was expecting $100 million exceptional financing from the private sector in 2002-03, possibly through restructuring of loans from the foreign branches of the nationalized banks.

On the basis of the current balance of payments projections for 2002-03, and in particular given the much higher official reserve levels, the Pakistani authorities informed the IMF that there was no need at this stage to consider augmentation of access under the Poverty Reduction Growth Facility (PRGF). However, augmentation could still be discussed in the future, in the event of major deviations from the programme path due to exogenous shocks.

The IMF authorities told Pakistani officials that they deserved credit for consolidating gains in macroeconomic stability in a difficult economic and political environment, while pursuing substantive structural reforms. Barring an escalation of regional tension, prospects for achieving the real growth target, the IMF believed, appeared good, the rate of inflation remains slightly lower than expected, and external balances were improving far more than programmed. This outcome reflects prudent public expenditure policies and favourable exogenous factors that helped in containing the budget deficit; a monetary and exchange rate policy mix well geared toward the inflation and reserves objectives; and strong external support.

Progress in reforming tax administration and in privatization has been encouraging. However, the IMF said that disappointments included notably continued below-target performance in tax collection and social spending, while defence outlays were increased in response to regional tensions. So far, low social spending largely reflects start-up problems of the recently established district and municipal governments, while tax shortfalls reflect lower than expected imports and only limited gains from the CBR administrative reforms. The IMF believed that both revenue and social spending have improved in recent months.

Another disappointments, noted by the IMF, was the temporary lowering of petroleum taxes and delays in the automatic fuel cost adjustments of electricity during April/May this year.