ISLAMABAD: With their inability to meet thrice-revised revenue target, the economic managers are uncertain about the remaining part of $11.3 billion programme of the International Monetary Fund. And they are likely to request for a fresh programme which, if approved, will be with even more stringent conditions.
Background discussions with officials here suggest that a fragile strategy to convince the IMF authorities about a sound economic performance during the last financial year was torpedoed even before its launch when then governor of State Bank of Pakistan Shahid H. Kardar declined to have anything to do with it.
Efforts to pressurise Mr Kardar into agreeing to reconcile revenue collection ‘exceeding the target’ by affirming receipts in June 2011 from the National Bank of Pakistan and some other enterprises in July led to his resignation because in SBP’s opinion coming year’s revenues could not be accounted for as previous year’s collection.
His resignation and an announcement by the Federal Board of Revenue chairman about surpassing the revenue target came as a surprises to Finance Minister Dr Abdul Hafeez Shaikh who at that time was on leave in Washington. On his return, he went straight to Mr Kardar to persuade him to withdraw his resignation but by that time things had already gone out of control.
Officials said that top economic managers had planned a reshuffle in economic bureaucracy that envisaged posting of economic affairs division secretary Abdul Wajid Rana as finance secretary in place of Dr Waqar Masood Khan who was to be appointed FBR chairman. Salman Siddique, the incumbent FBR chief, who is to retire soon, would be made the auditor general in place of Tanvir Agha whose tenure had been cut short as a consequence of the 18th Amendment even though he had been cleared by the law ministry to complete his term on which his appointment had been made.
Dr Waqar Masood Khan was appointed finance secretary without the knowledge of the finance minister. Sources said Dr Khan was not a favourite of Dr Shaikh because he often took an independent position on policy matters.
Officials would not confirm the plans for a bureaucratic reshuffle saying many proposals had come under consideration and discarded.
Insiders, however, suggest the changes may have been delayed but will not be shelved and there may be some modifications.
They indicate that Dr Khan was a strong contender for the post of SBP governor even before Mr Kardar was hired about 10 months ago and could now be considered for the important post given his equation with political bosses.
In the meanwhile, the IMF appears to have got wind of the things taking place behind the scene on the revenue front.
Therefore, the authorities found it prudent to officially accept the revenue shortfalls instead of creating a credibility gap.
This was crucial for the ongoing $11.3 billion standby arrangement (SBA) suspended in May last year. Of the SBA, disbursements of about $3.6 billion are outstanding. The first bulky repayment of about $1.2 billion to the IMF is due in February next year and Pakistan will require a fresh loan programme to make repayment.
The government was expecting the disbursement of half of the outstanding amount soon after the completion of the fifth review of the SBA during the current month on the basis of achievement of Rs1,588 billion revenue target and fiscal deficit of 5.3 per cent of GDP. This should have enabled the IMF to also issue a letter of comfort to other lenders to ease financial flows to Islamabad.
As the revenues stood short of target by a huge amount of Rs38 billion, the fiscal deficit also went up to around 6 per cent of GDP as some of the financing items could not materialise.Officials said the government was almost certain that the macroeconomic performance during the last financial year was not sufficient to secure the next IMF tranche and remain engaged under the existing programme that would mean a request for a fresh medium-term programme of about $3.5-5 billion. The new programme is believed to be harsher, given the unsuccessful completion of a softer 30-month standby arrangement.
And for this reason the authorities have not yet requested the IMF for a macroeconomic review which was originally scheduled to be in the third or last week of the current month. During the last meeting with IMF personnel in Dubai before finalisation of the federal budget 2011-12, the lending agencies had clearly told the authorities that they could consider resuming talks only on the basis of actual and reconciled data.
Previously, the IMF had declined a request to hold next review of the ‘suspended’ $11.3 billion standby programme on the basis of estimated figures of expenditure and revenues of the last financial year.
The lending agency has told authorities to wait for the actual numbers to set schedule for post-budget review talks. The government is yet to make public current year’s accounts of the consolidated expenditure and revenue, although these were finalised about a week ago.
The key reason for IMF’s insistence on actual numbers was based on previous slippages on estimated data but more importantly it wanted to ascertain if revenue and expenditure targets agreed to in pre-budget negotiations in Dubai had been achieved.
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