ISLAMABAD: The advance party has faced problems in the first three days of negotiations with the IMF over the government’s failure to implement the power sector reforms and the efforts of the government to cut its non-productive expenditures.

Sources in the finance ministry told Dawn that the issues faced by the officials at the ongoing Pak-IMF review meeting at Dubai included financial sector reforms and the progress made by the government towards this end.

However, the country has failed to implement the financial sector reforms to improve revenue collections and plug loopholes in the taxation and banking systems.

‘Two major demands of the IMF have recently been placed on the right track,’ said a senior official of the finance ministry, adding that these included approval of amendments in banking laws to protect the banks from default by the National Assembly finance committee.

The official said that the IMF had repeatedly expressed concerns that the smaller banks in Pakistan were vulnerable to the global financial crisis.

‘More than 100 banks have defaulted in the US in one year,’ the official said adding, ‘IMF has repeatedly said that our economy cannot bear default of a single bank.’

The second IMF demand in the financial sector was formulation of a strong anti-money laundering regulation in the country.

‘Both these demands are expected to be approved by the National Assembly during the current session that is before the talks with ends on Nov12,’ the official said.

However, at the power sector front the IMF has already agreed that the government could provide Rs55 billion subsidy in the current fiscal year.

Delay in increase in power tariff under the said agreement would also result in increase in the budget deficit beyond its target of 4.5 per cent as agreed with IMF, excluding IDPs expenditures.

The government has faced difficulty in the implementation of three-year Pakistan Country Assistance programme in power sector by the World Bank and the dispute with the bank over the implementation of power sector reforms might harm the Pakistani case in Dubai, sources said.

Among other things the programme calls for reducing the transportation and distribution losses of electricity distribution companies, and improving the efficiency of the electricity generation units.

Sources said that the other key issue faced by the Pakistani advance party is extravagancy by the government machinery.

The austerity measures discussed by the cabinet on Wednesday have been finalised keeping in view the preconditions of IMF for its ongoing programme, the finance ministry official said and added that the finance minister is expected to discuss the matter with the IMF team during the last three days of talks.