Pakistan seeks four waivers from IMF: PRGF disbursement
By Khaleeq Kiani
ISLAMABAD, Aug 16: Pakistan has sought four waivers from the International Monetary Fund for not meeting its performance criteria under the ninth review of the Poverty Reduction and Growth Facility (PRGF) and to release SDR 172.28 million ($252 million).
"The government requests waivers for the non-observance of the structural performance criteria...modification of the criteria...and completion of the eighth review", said Finance Minister Shaukat Aziz and State Bank Governor Dr Ishrat Hussain in a letter of intent submitted to the IMF.
The ninth review, to be based on end-June 2004 data by the IMF, will be the last one under the PRGF arrangement and will allow for the tenth and last disbursement of the $1.47 billion IMF programme by September 20, 2004.
At the same time, the government also committed to implementing the economic strategy set out in the Poverty Reduction Strategy Paper (PRSP), published in December 2003 and supported by the PRGF arrangement.
The targets of the structural performance criteria where Pakistan made deviations included: effective transfer of ownership of Habib Bank Limited by end-December 2003; preparation of an action plan by end-October 2003 for establishing a transparent regulatory framework for regional electricity tariff setting by end-December 2003; notification of electricity tariff adjustments within 30 days of the determination by the National Electric Power Regulatory Agency (Nepra); and not implementing downward electricity tariff adjustment determined by Nepra unless the respective utility met its accrual balance target in the previous quarter.
The government has also requested the IMF to increase the limit in the contracting of non-concessional loans up to $1 billion to meet an additionality of providing a sovereign guarantee to Pakistan International Airlines for its fleet renewal.
The effective transfer of ownership of Habib Bank took place in February 2004 upon request of the investor, against a target date of December 31, 2003, although the bid had been accepted on December 29, 2003.
While the government had prepared the action plan for establishing a transparent electricity tariff policy in October 2003, the announcement of the electricity tariff guidelines for Nepra was delayed until May 2004 to allow for comprehensive discussions with the World Bank on developing a financial recovery plan for the power sector.
The downward tariff adjustment for Karachi Electric Supply Corporation, determined by Nepra in mid-January 2004, was notified only in mid-April after the government had confirmed that the accrual balance of the preceding quarter was met and allowed time for discussions on the overall subsidy policy.
Finally, the government notified a downward electricity tariff adjustment for the Water and Power Development Authority in November 2003, even though Wapda missed its accrual balance target for end-September 2003, albeit by a very small margin.
However, the government delayed the notification until it was confident that Wapda would meet its cumulative end-December 2003 target which it did by a comfortable margin.
The government has also reassessed its needs for external non-concessional borrowing. In particular, a larger-than-expected guarantee for external borrowing by PIA has been provided on favourable terms to proceed with its fleet renewal and build on its successful business turnaround.
