Policy-level talks with IMF to begin tomorrow

ISLAMABAD: Pakistani officials and the visiting review mission of the International Monetary Fund (IMF) will start crucial policy level talks from Monday to decide the fate of the $1.7 billion tranche of the Standby Arrangement (SBA), it is learnt.

Federal Finance Minister Dr Abdul Hafeez Sheikh and SBP Governor Shahid Hafeez Kardar will lead the Pakistani side, while the IMF’s delegation will be headed by Adnan Mazarei, mission chief for Pakistan. The policy level talks, officials said, would continue for two to three days.
During the technical level talks, Pakistani and IMF officials finalised targets of real GDP growth at 2.8 percent, inflation at 14.5 percent, current account deficit at minus 2 percent and FBR’s revenue collection at Rs1,689 billion provided the government took additional measures such as imposing flood tax and abolishing sales tax exemptions.


Pakistani officials are considering various strategies including ending the $11.3 billion SBA loan facility after getting the sixth tranche and choosing not to ask for the seventh. Officials have also considered starting negotiations for a new loan programme. “Another option is implementing required reforms in taxation and power sector and seeking three-month extension from the IMF till March 2011 that will pave the way for getting the last tranche from the Fund,” said a senior official involved in the talks.

The IMF team argued that it would be difficult for them to persuade their executive board to extend a new loan without success on key structural issues such as RGST, power sector reforms, circular debt, liabilities of commodity operations, approval of a law from the Parliament on SBP, borrowing from SBP and fiscal deficit.
“We will have to show our resolve by implementing crucial reforms. Otherwise, the ongoing talks on fifth review and release of the sixth tranche cannot succeed,” said a senior official. He added that the IMF team was constantly asking the authorities to ensure the end of the programme at a successful note.

Another official said the new IMF loan programme would bring more stringent conditionalities such as overcoming cash bleeding of public sector enterprises even by laying off surplus staff and taxing people more heavily.

A provincial finance secretary said the center and provinces held a meeting on Friday at FBR’s headquarters to iron out differences on standalone services under reformed general sales tax (RGST), but it remained inconclusive and that there would be more rounds of talks to reach a consensus.