NEW YORK, July 4: The International Monetary Fund on Wednesday approved $114 million tranche for Pakistan under the Poverty Reduction Growth Facility (PRGF). The total disbursements under the programme amounts to $343 million.
The amount would be disbursed in the central bank’s account on July 22.
The Fund also completed the second review of Pakistan’s performance under a three-year, SDR 1.03 billion (about US$$1.37 billion) PRGF arrangement.
In a press release, the IMF said in approving the disbursement, its executive board granted a waiver of Pakistan’s non-observance of the quarterly revenue target for the period that ended March 31, 2002. The shortfall in revenue essentially reflected continued lower-than-expected imports in the aftermath of September 2001 events.
After the board meeting, Deputy Managing Director and Acting Chairman of IMF, Eduardo Aninat, said that “forceful implementation of the restructuring strategy for the two power utilities, the Water and Power Development Authority and the Karachi Electric Supply Corporation, is essential for putting an end to their persistent drain on budgetary resources. Electricity tariff adjustments are needed to correct past increases in input costs, while appropriate safety-net measures should protect the poorest consumers.
“Moreover, both public utilities need to be held more clearly accountable for their performance reducing leakage, theft, administrative costs, and enforcing bill collections. The implementation of the financial improvement plan for Wapda, agreed with the World Bank, will be monitored closely and results reported to the public. Regarding KESC, the challenge will be to complete the required financial restructuring, while establishing sufficient regulatory certainty for potential investors, in order to allow its privatization in a transparent and timely manner. Sustained implementation of the government’s wide-ranging governance agenda will help support private sector activity and investor confidence,” Aninat said.
He said the Fund commended Pakistan for consolidating gains in macroeconomic stability and progressing with structural reforms in a difficult economic and political environment. Inflation remains slow and strong private capital inflows and remittances have allowed a build up of official reserves well above programme targets.
Aninat underscored that the “implementation of the budget for the year 2002-03 will help reduce public debt while increasing funding for social services, especially health and education expenditures.
He, however, stressed “this will require strong determination enforcing tax collection, the continued timely implementation of reforms to enhance tax administration, and improved tracking and effective monitoring of social expenditure and related outcomes.
The authorities should also stand ready to undertake appropriate corrective fiscal measures needed to achieve the budgetary target.”
The board also noted that the fiscal deficit for end-March 2002 was lower than programmed. Disappointingly, tax revenue collected by the Central Board of Revenue, as well as social sector spending, were lower than targeted, although recent developments point to improved performance in these areas, Aninat said.
He noted that Pakistan’s economic programme for the year 2002-03 was aimed at tangible progress toward consolidating macroeconomic stability, reducing poverty, and strengthening governance in a wide range of areas.
“Barring a further deterioration of the regional security situation or other adverse shocks, real GDP is projected to grow by 4.5 per cent, supported by a notable pick up in exports. Cautious monetary and exchange rate policies and continued fiscal consolidation will help keep inflation low and allow for a further accumulation of international reserves,” he said.
The PRGF is the IMF’s concessional facility for low-income countries. PRGF-supported programmes will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PREPS).
The federal finance minister, Shaukat Aziz, has said that following the end of the current PRGF programme, Pakistan would not seek further assistance from the Fund.