In the talks with IMF, the PPP government tried to seek a bailout, if not with money, at least with good words for a smooth sail until its term comes to an end in a few weeks. The Fund did not oblige.

A longer than usual two-week consultations between the government and a visiting IMF mission has again revolved around the well-known issues — stagnant revenue-to-GDP ratio and faltering public sector enterprises particularly the power sector.

Over Rs1.8 trillion injected into the power sector including estimates for current year could have been more than sufficient to complete Rs1.37-trillion Diamer-Bhasha dam, Rs125-billion Iran-Pakistan Gas Pipeline, Rves80-billion Tarbela extension project and Rs274-billion Neelum-Jhelum Project. These projects, if implemented, could help resolve much of the energy problem and correct imbalanced pricing caused by adverse energy mix.

This is in addition to over Rs3 trillion losses suffered by the national economy as a result of energy shortages. The cumulative loss, therefore, comes to almost Rs5 trillion or about 18 months of consolidated federal and provincial budgets.

The government has revised fiscal deficit limit to 5.6 per cent of GDP from of 4.7 per cent targeted in the budget 2012-13. The IMF sees the deficit touching seven per cent. The government also concedes that the revenue collection will miss the budget target of Rs2.38 trillion by at least Rs130 billion, while the IMF projects the shortfall at about Rs200 billion.

The government is also sticking to its GDP growth rate target of 4.3 per cent owing primarily to robust agriculture output, but IMF estimates it at around 3.7 per cent. World Bank sees the growth rate at 3.8 per cent that will complete the five-year cycle of consecutive failures of growth targets. The bank believes that the sluggish growth pattern was unlikely to break for another two years unless a new government after elections immediately starts correcting the decline.

What kind of bailout could come from the IMF is yet unclear given the fact that most of the plans for improving power sector and mobilising domestic resources would depend on ownership and implementation of the next government. The government’s strategy to keep the IMF engaged in dialogue may have worked well but could not be expected to yield wonders when the negotiating government is completing its term in less than two months.

At play in the background is the combination of geo-political and diplomatic factors. With the United States preparing for withdrawal of its forces from Afghanistan and its policy of economic squeeze on Iran — Islamabad ’s two closest neighbours — it has to be seen how Pakistan moves ahead with gas import plan and barter trade arrangements with Iran.

A tight fiscal position and weak external indicators coupled with almost no support from US-backed major multilaterals, Pakistan is already in a tight corner. With disbursement under coalition support fund for services being provided to US-led coalition forces in Afghanistan coming to a close, America is trying to keep Pakistan looking towards its political and financial support by raising its hopes for $3.5 billion assistance ($250 million per year) for $14.5 billion strategic Diamer-Bhasha Dam, although the World Bank having largest shareholding from Washington-DC looks the other way.

In the process, it has been able to create uncertainty about Pakistan’s gas import agreement with Iran that is to attract ‘take or pay’ penalties after December 2014. A recent cancellation of the visit of President Zardari to Tehran at the last moment and delay in award of contract for construction of the pipeline inside Pakistan’s territory is a case in point. Slower growth will generate further social unrest.

So, the subdued economic growth rate for five consecutive years is worrisome as inadequate job opportunities to a growing young population requires a sustainable 7-8 per cent growth rate for at least 10 years and .beyond.

In this background, the IMF believes that Pakistan’s macroeconomic stability in the short- to medium-term would largely depend on putting to an end to the power sector crises and increasing resource mobilisation to at least 15 per cent of GDP.

The habitual presentation of higher revenue forecasts and lower expenditures, particularly subsidy, to indicate lower fiscal deficits has also cost the government its credibility in the eyes of the international lenders. None of the revenue, expenditure and deficit targets were met over the last five years. In fact, some of the big ticket items — auction of 3G telecom licences, PTCL receipts from Etisalat — repeatedly mentioned in budget books every year, are just a few examples.

The 3G auction has again come to a halt following sacking of chairman of the Pakistan Telecommunication Authority and scheduled retirement of its two members in about two months. The interim government and the new political government are unlikely to meet the requirements of procurement rules before June 30, 2013.The IMF mission has concerns over reforms programme specifically relating to power sector, public sector enterprises and revenue collection. The overall situation has become uncertain in the wake of political transition as the two sides holddivergent views on revenue side, expenditures, energy situation, banking sector supervision, monetary policy and restructuring of the public sector enterprises.The major cause of concern for the IMF and other multilaterals has been the energy sector’s enforcement mechanism to control theft and pilferage. The government has shared with the Fund its three-year restructuring programme for power sector based on recommendations of a special parliamentary committee on energy crises to convince the IMF that major political parties did not have diverging views. This included conversion of furnace oil based power plants to coal and hydropower generation to improve fuel mix. In the short- term, the mission wanted web-based monitoring of power generation, transmission and distribution for making the entire power sector mechanism transparent. The previous commitments by the government for power sector reforms have more or less remained unfulfilled.