KARACHI, Dec 13: Pakistan’s progress towards poverty reduction would be closely monitored by the IMF under its Poverty Reduction and Growth Facility (PRGF) programme.

The government will be required to publish quarterly progress report on implementation of Poverty Reduction Strategy and projected expenditure.

Under the first year of the PRGF, the publication of the quarterly report would start from end-December for first quarter of fiscal 2001-2002.

The expenditure on poverty reduction has been projected in the Interim-Poverty Reduction Strategy Paper (I-PRSP) submitted by the government to the IMF. A sum of Rs136.4 billion has been projected for current fiscal against the provisional figure of Rs119.3 billion in 2000-2001.

Under the Memorandum of Economic and Financial Policies, (MEFP), signed with the IMF, the government will also prepare a list of selected indicators and tracking/ monitoring mix and preliminary annual targets for current and next two fiscal years for poverty reduction programme.

The MEFP lays down nine structural performance criteria, seven structural benchmarks and has listed about half a dozen prior-actions under the PRGF. These are far less in numbers than those conditionalities prescribed for the standby arrangement (SBA) and reflect the confidence of the IFIs in Pakistan’s management of the national economy.

Under the first year of the PRGF, the State Bank would issue circular allowing banks to purchase foreign exchange from money changers at freely negotiated rates from August 1, 2002. A month earlier, by July 1, a streamlined foreign exchange manual will be issued to simplify and clarify rules regarding access to foreign exchange and current account transactions.

The State Bank has already allowed commercial banks to purchase and sell foreign exchange, doing away with the earlier requirement of forex transactions being linked to commercial deals. Besides, the government has also assured the IMF that it would pursue efforts on deepening of the inter-bank foreign exchange market to facilitate the phasing out of SBP’s kerb market purchases. The State Bank is gradually raising its purchases from the inter-bank market to build forex reserves.

Pakistan has also agreed to allow unlimited access to foreign exchange on the inter-bank market for all current transactions (including dividends and profit repatriation) beyond the current bonafide limits, which will be granted on the basis of appropriate, clearly specified documentation.

The structural performance criteria with targeted dates, as specified by MEFP, are as follows:

1) No new exemptions or special privileges regarding income-tax, customs duties or GST to be granted, no new regulatory duties to be imposed (except for anti-dumping measures) and all time-bound exemptions and regulatory import duties to lapse without extension, except for existing contracts and exemptions based on international commitments. No date set. It is a continuous process.

2) New organization set-up for CBR headquarters as per approved CBR plan, by February 28, 2002.

3) Apply standard GST penalty regime to retailers and eliminate GST exemptions for all fertilizer wholesale and retail trade by March 31, 2002.

4) Adopt timetable for phasing out, during the programme period, of the GST subsidy on electricity and GST exemptions for edible oil, vegetable ghee and pharmaceuticals (except for life saving drugs) by March 2002.

5) Universal self-assessment for all income earned from July 1, 2002.

6) Start operations by July 1, 2002 of a Large Taxpayer Unit, integrating all domestic tax operations.

7) Implement income tax reforms package effective for income earned from July 1, 2002 including: elimination of at least two minor withholding taxes; elimination of at least 55 income tax rebates, concessions and non-standard exemptions from the CRITO-list; and lowering the threshold on NSS schemes subject to withholding tax on interest income from Rs300,000 to Rs150,000.

8) Bring KESC to the point of sale by July 31, 2002.

9) Allow banks to purchase from August 1, 2002 foreign exchange from money changers at freely negotiated rates.

The structural benchmarks under the first year of the PRGF with indicated target dates are as follows:

1) Prepare by December 2001, a list of intermediate indicators and tracking/monitoring mix for I-PRSP and preliminary annual targets for the period 2001-2002 and 2002-2003/04.

2) Quarterly progress reports on execution of Poverty Reduction Strategy and expenditure starting from end-December 2001.

3) By March 31, 2002, rules and regulations be published including for record-keeping under the universal self-assessment scheme for tax to be effective from July 1, 2001.

4) Prepare proposals of income and sales tax appeals and dispute resolution process with a view to implementing them with 2002-03 budget. Target date March 31, 2002.

5) Bring United Bank and PTCL to the point of sale through transparent and open public offer by May 31, 2002.

6) Issue a streamlined foreign exchange manual to simplify and clarify rules regarding access to foreign exchange and current account transactions by July 2002.

7) Establish a contributory pension scheme for new recruits in the civil service and prepare a third phase public pension reform package, in collaboration with the World Bank and involving actuarially fair reform of early retirement and of commutation tables.