The International Monetary Fund on Tuesday announced “immediate disbursement” of $504.8 million to Pakistan.On Sept 28, the IMF Executive Board completed 8th review of a 36-month extended fund facility for Pakistan. Tuesday’s disbursement brings total disbursements to Pakistan to about $4.54 billion.In completing the review, the board also approved the authorities’ request for waivers of non-observance of the end-June 2015 performance criteria on the ceiling on overall budget deficit and the ceiling on net government budget borrowing from the State Bank of Pakistan. The waivers also cover modification to adjust the end-September 2015 performance criterion on net domestic assets of the SBP target. “Economic activity is picking up pace and vulnerabilities are gradually receding,’ said IMF Deputy Managing Director and Acting Chair Mitsuhiro Furusawa while announcing the approval.But he also urged Pakistani authorities to understand that continued prudent policies and reform efforts were necessary to lock in the gains so far in macroeconomic stability and reinforce the foundation for sustained high growth. The board does not say that the fiscal situation has improved, preferring to restrict itself to an anodyne comment that “[t]he authorities’ commitment to strengthening Pakistan’s fiscal position is welcome”. It goes on to add that further steps “remain key” to delivering on this commitment, laying out the usual recipe of “broadening the tax base and strengthening tax administration”. The inability of the board to note anything more than a “commitment” to strengthening the fiscal framework is what should be noted.Likewise with the progress on many other fronts. It notes an improvement in the foreign exchange reserves, but says “additional efforts are needed”.Similarly, on central bank autonomy, the board calls for the “early adoption of pending legislation”, a matter that has been dragging for many years now. Also with the required amendments to the anti-money laundering legislation, which the government had committed would be passed by the end of September, the board notes that it “remains an important policy priority for the authorities”.The statement refuses to view the controversy surrounding the fiscal numbers declared by the government at the end of June, which is to be expected. But the more detailed review documents that should be released soon would be deficient if they did not tell us more about how the Fund is looking at this affair.
The board has placed its priorities for Pakistan on record; these include power-sector reforms and privatisation. The fact that the board said very little about the external sector and the quality of the improvement in the reserves as well as rising external debt is an important gap.
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