ISLAMABAD: A crucial meeting of the International Monetary Fund’s (IMF) executive board, which has to approve the 5th tranche of $1.2 billion for Pakistan under its standby arrangement programme, has been delayed till mid-May because of the insertion of a new paragraph on the power sector, according to the letter of intent made available to The News.
Earlier, the meeting was set for May 3, but now it would take place on May 15 in Washington. This meeting has been postponed in April also because of Pakistan’s failure to introduce a bill on the Value-Added Tax (VAT) before the Parliament on time.
Under the new paragraph inserted in the letter of intent, Islamabad has extended written guarantees to increase the power tariff by six per cent from April 1, 2010 retrospectively.
In the wake of delayed IMF board meeting, a scheduled visit of the Finance Ministry officials to Washington from April 24 was also postponed, official sources said.
The officials were supposed to update the IMF on the state of Pakistan’s economy and convince the executive board members and the management of the fund to approve the 5th tranche of $1.2 billion out of the total package of $11.3 billion.
The Finance Ministry officials, including Adviser to the Prime Minister on Finance, Dr Hafeez Sheikh, Finance Secretary Salman Siddiqui, and a representative of Pakistan on the IMF Executive Board Tariq Bajwa are already in Washington for the spring meetings of the IMF and the World Bank. They are apprising the top bosses of these global donor agencies about Pakistan’s efforts to revive the economy, including tax reforms and removal of subsidies on the electricity tariff.
Most of these steps are highly unpopular, but the economic experts say that tough steps remain the need of the hour to fix the economy.
According to the letter of intent, signed by Dr Hafeez Sheikh and State Bank of Pakistan Governor Syed Saleem Raza, the government has updated its economic programme for 2009/10 (July-June) as reflected in the fourth Supplementary Memorandum of Economic and Financial Policies (SMEFP).
“In support of our policies, the government of Pakistan requests that the executive board of the fund complete the fourth review and approve the fifth purchase under the SBA in an amount equivalent to SDR 766.7 million,” it said.
The government was reluctant to increase the power tariff by 6.0 per cent from April 1, 2010, but the World Bank and the Asian Development Bank had extended stiff resistance and forced the government to succumb to the donorsí pressure.
The supplementary memorandum clearly said that the government will increase the power tariff with effect from April 1, 2010, but the timeframe for issuance of its formal notification was not mentioned.
Officials said that the supplementary memorandum was dispatched to the fund’s headquarters on Friday so that the board could not take up Pakistanís case in its scheduled meetings on May 3 or 5.
“The IMF’s Executive Board will have to prepare itself first and then circulate for other members prior to 10 to 15 days in order to give them space for preparation, so the board will consider the fifth tranche after May 11 meetings,” one of the top officials of the Finance Division said.
During these days, the fund’s top officials would be busy attending the annual spring meetings of the IMF-WB and would start preparation on Islamabad’s case after April 28, they said.
The supplementary memorandum should be circulated to the members of the executive board at least 15 days before the meeting, suggesting that the meeting on Pakistan cannot take place before May 11. It is expected that the IMF’s executive board will hold its meeting on Pakistan by May 15.
Source The News
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