ISLAMABAD: Caretaker Finance Minister Shamshad Akhtar had an introductory virtual engagement with the staff mission of the International Momentary Fund (IMF) and is reported to have promised steadfast implementation of the policy actions committed under the $3bn Standby Arrangement during the tenure of the caretaker government to ensure economic stability.

Informed sources said the two sides had an informal update of the programme implementation with particular emphasis on structural benchmarks necessary for successful completion of the second quarterly review due in October or early November based on end-September data that would secure disbursement of about $710 million worth of second tranche in December.

Dr Akhtar and IMF Resident Representative Esther Perez Ruiz did not respond to requests for comments.

Informed sources, however, suggested the government side reaffirmed as recently conveyed to the fund by the secretary finance that policy actions required to be taken by end-July had been completed with the notification of 26pc increase in electricity rates and the National Electric Power Regulatory Authority (Nepra) had completed the hearing process for automatic notification of monthly fuel price adjustments (FPAs) and quarterly tariff adjustments (QTAs) to make up for the exchange rate losses and interest rates.

It was reported that there could be some procedural delays but recovery of dues would be ensured in a manner that circular debt flow remains by and large within the agreed targets while keeping in view the sinking consumption and end-quarter benchmarks are met. These sources said the meeting that took place on Thursday evening had not visualised the countrywide protests turning violent in major cities against skyrocketing electricity bills because of tariff rebasing, heavy FPAs, and financing cost surcharges imposed by the government while the Rs5.40 per unit QTA was yet to come. This could negatively impact recoveries and cause slippages to the circular debt targets.

While the government is required to place all the state-owned enterprises (SOEs) under the monitoring of a central monitoring unit (CMU) in the Ministry of Finance for financial management by end-November, the IMF has some queries about the recent outsourcing of port facilities on G2G basis and is reported to have reemphasised the importance of the end-November structural benchmark in this regard. Under the end-November benchmark, the government has to improve SOEs governance by operationalising SOE law into a policy that separates ownership arrangements.

The widening gap between interbank and open market exchange rates beyond the agreed threshold is also being watched. Under the SBA, Pakistan has committed to keep the gap within 1.25pc on a weekly average basis but has remained around 3 to 4pc in recent weeks. The sources said Dr Akhtar who had earlier brainstorming with the SBP team for some administrative measures is reported to have assured the fund that the exchange rate would remain market-based without any official interference or artificial environment.

The IMF had made it clear while signing the SBA in July that given the challenges, the new SBA would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead but had warned that “the full and timely implementation of the programme will be critical for its success in light of the difficult challenges”.

Published in Dawn, August 26th, 2023