February 2020




By APP Published: February 24, 2020

ISLAMABAD: The World Bank has shown its interest to provide $188 million to fund the upcoming Ecosystem Restoration Initiative aims at implementing the ‘Ten Billion Tree Tsunami’ and ‘Recharge Pakistan’ programmes.

The $188 million fund will be placed under the National Disaster Risk Management Fund (NDRMF), as it already has a framework and mechanism in place for quick and efficient disbursement of the money.

NDRMF has already been financing projects through funding being arranged from the Asian Development Bank, said a press release issued on Sunday.

The Ecosystem Restoration Initiative in addition to financing afforestation projects such as the Ten Billion Tree Tsunami would also focus on Recharge Pakistan, E-Vehicles, Marine Life and Blue Economy, Biodiversity and Land Degradation, provision of early warning radars and eco-tourism.

The PTI government has had launched these major initiatives as part of climate change mitigation and adaptation, and fighting environmental degradation.

The TBTT project is an up-scaled version of the project implemented by the PTI government in Khyber-Pakhtunkhwa between 2013 and 2018.

The Ecosystem Restoration Initiatives will not only provide money to the provincial governments and other implementation partners through grant financing, it will also free up space in the budget allocations for the government.

The bank has already held consultations with federal government departments, provincial governments and non-governmental organisations in the last few weeks to finalise restructuring proposal of its Hydro-Met Project.

The hydro-meteorological and climate services project is aimed at strengthening the government’s capacity to deliver reliable and timely weather, hydrological and climate information and services to user departments and communities.

Now the bank will use the project funds to finance the Ecosystem Restoration Initiative.



Rashid Amjad February 27, 2020

AFTER hitting rock-bottom, the economy is finally beginning to show some signs of being on the cusp of an upturn. The recent review by the IMF team points in this direction — inflationary pressures are easing and there is a gradual rekindling of economic growth. The real challenge now is to nourish the emerging green shoots and concentrate policy efforts on building growth. The alternative, sadly, would mean a painfully slow recovery after walking on broken glass to restore macroeconomic stability. This the government can ill afford.

To reignite sustainable growth, however, it is not the government that has to be convinced that a change is needed in the sequencing of the current IMF programme but the Fund itself. This may turn out to be a Herculean task since the IMF is known for its stubbornness and its ‘one shoe fits all’ neo-liberal economic dogma.

The basic aim of the current stabilisation package under IMF tutelage is basically twofold. The first aim is higher revenues and the second is increasing exports and reducing imports to overcome the recurring fiscal and current account deficits (and eventually building our real not borrowed foreign exchange reserves) which have been responsible over the past three decades for bringing the economy to a grinding halt and having to turn to the IMF to bail us out yet again.

Unfortunately, in designing this IMF programme what was not sufficiently realised by the government and the IMF was that in the short run, there may be a trade-off between the two goals of maximising revenues and maximising exports at the same time. Just eight months into the programme, this trade-off is apparent; meeting the ambitious revenue targets increasingly entails reneging on the incentives promised to exporters.

The government’s efforts should be concentrated on easing the constraints faced by exporters.

This has taken the form of long delays in duty drawback refunds that reached Rs300 billion in December 2019 and retraction of cheaper energy and much-needed reduction in tariffs for cheaper imported inputs to make exports, and indeed the economy, internationally competitive — a major goal of the current IMF programme.

While the Pakistan government has now realised the limits to which the people can bear backbreaking inflation, the loss of jobs and the resulting rise in poverty, the IMF, unfortunately, is still slow to grasp the stark reality. All benchmarks set by the IMF to be achieved by December 2019 have been satisfactorily met. But the Fund is not compromising when it comes to reducing its still unrealistic revised revenue targets, and insists on raising energy prices to bring down the circular debt.

It is imperative that the IMF realises before the current programme stalls that not only are these conditionalities impossible for the government to accept but also that there exist fatal flaws and contradictions in the programme which must be urgently corrected. A glaring example is that the revenue target originally agreed upon did not take into account the reduction in revenues resulting from the large fall in imports due to the massive devaluation.

That said, nobody is denying that Pakistan’s tax revenues are abysmally low at around 11 per cent of GDP. And no one can disagree with the IMF argument that if we are to improve our pathetic human development indicators and meet the SDGs by 2030, tax revenues would need to be increased by at least five to six percentage points sooner rather than later. Yet given the government’s fast-dwindling political capital or goodwill among the people, and the narrowing space for higher taxes, revenues can only increase gradually. When economic conditions improve, the people will be more prepared to bear the needed tax burden.

Making the case for shifting the emphasis to maximising exports under the current IMF programme is to acknowledge that, as in the past, the binding constraint on Pakistan’s sustained growth revival is the lack of foreign exchange. Solely slashing imports through massive devaluation is not a feasible or efficient solution, nor is an increase only in export volumes. What is critical is a corresponding rise in our export foreign exchange earnings.

To achieve this goal, the government’s efforts should be concentrated on easing the constraints faced by exporters even if it means taking some bold unconventional steps including the immediate return of import duties that have been paid, as well as reducing the high banking margins required on imported inputs by decreasing interest rates. Many exporters are already facing severe capacity constraints. This situation should not be made worse as they are facing liquidity constraints in meeting new orders. There are indications that recent developments in East Asia are making many global importers turn to Pakistan. They will definitely turn to other countries, including India, if we are unable to respond to their demands.

The other real opening on the economic front, mainly as a result of massive devaluation and the exorbitant prices of imports, are the profitable opportunities for the growth of import-substitution industries. Ensuring their efficient and low-cost production would need cheaper imported inputs which can only be made available by cutting import duties. While the IMF supports further opening up the economy it must also realise the trade-off in meeting the extremely ambitious revenue targets.

We can, with the IMF’s support and understanding, move out of the current downturn and stagflation phase through an export-led growth strategy which can create decent jobs together with the recent upturn in manufacturing after many months of decline. This would, however, require a better sequencing of economic reforms and greater concentration on export-led growth instead of pursuing impossible revenue targets at the same time. But will the IMF ever change its spots?

The writer is a professor at the Lahore School of Economics and former vice chancellor of the Pakistan Institute of Development Economics.

Published in Dawn, February 27th, 2020



Khaleeq Kiani Updated February 28, 2020

ISLAMABAD: The International Monetary Fund (IMF) on Thursday said it had reached a staff-level agreement with Pakistan authorities “on policies and reforms needed to complete the second review” of the $6bn Extended Fund Facility (EFF).

The announcement was made by Ernesto Ramirez Rigo, Mission Chief for Pakistan, through a brief statement after a series of engagements with Adviser to the Prime Minister on Finance and Revenue Dr Hafeez Shaikh, Governor of the State Bank of Pakistan Dr Reza Baqir and Finance Secretary Naveed Kamran Baloch through video conference over the last two weeks.

“IMF staff and the Pakistani authorities have reached a staff-level agreement on policies and reforms needed to complete the second review of the authorities’ reform programme supported under the EFF,” said the statement.

The agreement is subject to approval by the IMF management and consideration by its executive board, which is expected in early April. Completion of the review will enable disbursement of SDR 328 million (around $450m), the statement said.

Announcement made by Fund’s mission chief for Pakistan

The Pakistan authorities were tight-lipped over the “policies and reforms needed to complete the second review” but hinted that the two sides had agreed over the fact that some breathing space was required to absorb earlier shocks before further adjustment as higher than estimated inflation had put unexpected pressure on majority of the people.

An official said it was also hoped that an ongoing ease in oil prices would create room for adjustment, a component of which could become part of the next year’s budget. He said full disclosure of agreed upon policy actions could be ‘market sensitive’ and should be left for appropriate time.

Normally, details regarding reviews of IMF-supported programmes are made public after the reviews are approved by the fund’s executive board and staff reports are released. The executive board meeting due for early March has now been postponed for a month until early April.

Some of the outstanding issues under the programme are further adjustment in electricity and gas tariffs and revenue shortfall.

However, the official said the two sides also acknowledged that there was tremendous pressure on the government over energy pricing and challenges faced by the industry. The prime minister has already announced recently that electricity and gas rates would remained unchanged during the remaining four months of the fiscal year.

Another official also linked the flow of positive news from the IMF with encouraging overtures by Washington, including the recent visit of the US commerce secretary to Islamabad and hectic engagements at almost every level of the government including various ministries and the prime minister office and the coming signing of Afghan peace agreement over the next couple of days.

On completion of staff level discussions between February 3 and 13 in Islamabad, the IMF mission had reported considerable progress to have been made in the last few months in advancing reforms and continuing with sound economic policies. “All end-December performance criteria were met, and structural benchmarks have been completed”, the fund had said, adding the steadfast progress on programme implementation would pave the way for the IMF executive board’s consideration of the review.

The IMF felt the macroeconomic outlook remained broadly as expected at the time of the first review and economic activity had stabilised and remained on the path of gradual recovery.

The fund believed the current account deficit had declined, helped by the real exchange rate that was now broadly in line with fundamentals, while international reserves continued to rebuild at a pace considerably faster than anticipated. It expected the inflation should start to see a declining trend as the pass-through of exchange rate depreciation had been absorbed and supply-side constraints appeared to be temporary.

Published in Dawn, February 28th, 2020



Iftikhar A. Khan Updated February 29, 2020

ISLAMABAD: During Friday’s Senate session, the government was urged to disclose the terms of agreement reached with International Monetary Fund (IMF) to get a $6 billion bailout package.

Speaking in the lower house of parliament, PPP leader Mian Raza Rabbani said the three-member team which negotiated the deal with the IMF consisted of the adviser to the prime minister on finance, a technocrat, the State Bank of Pakistan governor – a former employee of the IMF, and the finance secretary, a bureaucrat. “This makes it clear that elected representatives have no value,” he added.

Mr Rabbani said reports suggested that electricity tariff would go up under a condition set by the agreement despite Prime Minister Imran Khan’s announcement of plans to freeze power and gas tariffs. “Will the IMF override decisions taken by the prime minister and the cabinet?” he asked.

On Mr Rabbani’s demand, Senate Chairman Sadiq Sanjrani asked the adviser to the PM on finance to come and share with the House details of the agreement with the IMF.

World powers asked to take notice of blatant human rights violations in India

On another occasion, Mr Rabbani questioned the claims of success on the foreign policy front being made by the government. He said while the government was upbeat over US President Donald Trump’s offer for mediation on Kashmir, it forgot that he was the man who gave legitimacy to Israeli claim on the Golan heights, recognised Jerusalem as Israel’s capital and proposed a so-called Middle East peace plan heavily tilted in Israel’s favour. “He [Trump] did not have the moral courage to raise the issue of genocide of Kashmiris and lockdown of occupied Kashmir for the last 210 days, and the bloodbath in New Delhi where he was present. So what we are trumpeting about?” he wondered.

Quoting from a joint communiqué signed by the United States and India at the conclusion of Mr Trump’s visit, Mr Rabbani said part of it read: “Noting that a strong and capable Indian military supports peace, stability, and a rules-based order in the Indo-Pacific, and reaffirming his pledge to support the transfer to India of advanced US military technology…”

He said it also read: “President Trump and Prime Minister Modi denounced any use of terrorist proxies and strongly condemned cross-border terrorism in all its forms. They call on Pakistan to ensure that no territory under its control is used to launch terrorist attacks, and to expeditiously bring to justice the perpetrators of such attacks, including 26/11Mumbai and Pathankot.”

Mr Rabbani said while reiterating his offer for mediation, President Trump also said Pakistan was working on Kashmir. He asked the foreign ministry to explain what measures were being taken on Kashmir “behind the scene” and regretted that the parliament was unaware of it.

The issue of coronavirus was also discussed in the House. “This forum should have been used to impart vital information about coronavirus pandemic and its current status in the country without causing panic. Our job is to protect the citizens but where we are on that front,” PPP parliamentary leader in the Senate Sherry Rehman said.

She said: “This is a global issue and even the likes of China, which happens to be a robust constructive economy with an exemplary spirit to fight back, are struggling to cope up with it. How will Pakistan tackle such a crippling crisis? Country­wide, schools are shutting down.

“The situation necessitates an urgent briefing by the government to take the nation into confidence. If I were health minister I would be proactively standing in this House right now. The prime minister himself should have been present here. I am not trying to pin the blame on anyone province as the virus could spread anywhere, but a student from Iran who flew in and was infected with it had complained of the symptoms, but no tests were performed on him. There’s a risk of more and more people getting infected as we know how this [virus] can spread exponentially,” Ms Rehman said.

“A young woman … said that she went to the National Institute of Health to get tested for the virus. She was weeping as she gave an account of how she was made to wait for 40 minutes before she was initially refused. She was later administered the test after much pushing … In Karachi however people are getting checked for the virus at the Jinnah terminal. Without delay, directives should have been issued from the floor of this House regarding testing spots for the virus to give a sense of clarity to the people who have no guidance on how to take precautions,” Senator Rehman said.

Leader of the House in the Senate Syed Shibli Faraz, in a statement on behalf of the Ministry for National Health Services, said the National Action Plan for the COVID-19 prevention and management had been developed and a national core committee was monitoring the situation and preparedness measures. He said standard guidelines had been developed by the ministry for screening of suspected patients and shared with all stakeholders. He said that a health helpline for COVID-19 (the disease caused by coronavirus) was being established while the Public Health Emergency Operation Centre had been activated for reviewing the situation, risk assessment and follow-up of the cases on a daily basis.

Speeches were also made on the situation obtaining in India involving communal riots and the world powers were asked to take notice of the blatant human rights violations in India.

PML-Nawaz Parliamentary Leader of in the Senate Mushahidullah Khan said the world should intervene in what was happening in India. Jamaat-i-Islami chief Sirajul Haq said Pakistan should play its role over recent happenings in India as minorities were not safe there.

Published in Dawn, February 29th, 2020



The Newspaper’s Reporter Updated February 29, 2020

ISLAMABAD: The European Union will provide a grant of €13 million for improving public sector financial management in the federal and provincial governments of Sindh and Balochistan.

The financing agreement on ‘Public Financial Management Support Programme-II’ between Pakistan and the EU was signed here on Friday.

Secretary Economic Affairs Division, Dr Syed Pervaiz Abbas and EU Ambassador in Pakistan, Androulla Kaminara signed the agreement on behalf of their respective sides. Minister for Economic Affairs, Hammad Azhar witnessed the signing ceremony.

The thematic area being targeted under the EU support will improve governance with an aim to reduce impact of poverty and social inequality.

Azhar thanked the EU for the assistance, noting that it will be helpful in improving service delivery through enhanced efficiency in public finances, policy coherence and aid governance in Sindh, Balochistan and at the federal level.

This programme will further the support to reform the public finance management, in particular with, the planning and budgeting systems, and the internal controls in budget execution with a view to achieve fiscal discipline, enable strategic allocation of budgetary resources, and will help to strengthen aid coordination mechanisms.

Published in Dawn, February 29th, 2020



By FARHAT ALI on February 29, 2020

Ever since the IMF rolled out its current programme in Pakistan, the global lending agency’s programme for Egypt has been under intense discussions. The IMF rolled out, in 2016, a programme in Egypt. There are striking similarities between Egypt’s and Pakistan’s programmes. They however differ from each other in the sense that the IMF package for Egypt was of $ 12 billion against Pakistan’s $ 6 billion.

Egypt’s IMF programme was spearheaded by Dr Reza Baqir who, upon its conclusion, moved to Pakistan not as an IMF official but as the Governor of State Bank of Pakistan.

A perception was created by country’s leading economists that the Egypt model is being replicated by the IMF in Pakistan and that the Egypt model had failed to deliver as per public expectations and turned out to be much against public interests, pushing more people below the poverty level.

A closer look at the Egypt’s programme by this writer has revealed that indeed the issues, model and recipe of reforms of the two programmes have striking similarities but the results are not as perceived and propagated by many. On the contrary, the Egypt model, concluded in 2019, appears to be a success story which helped stabilise the largest Arab country’s (Egypt is the largest Arab country in terms of population) fiscal and economic disciplines with the potential to eventually improve the well-being of the poor. In short-term, the programme did push more people below the poverty line.

It was in 2016 that Egypt confronted a severe fiscal and economic crunch amid a shortage in its foreign currency reserves. Egypt approached the IMF to move out of the crisis and agreed with the Fund on a $12 billion extended arrangement to be disbursed in tranches over a period of three years.

The IMF loan, supplemented the loans taken by Egypt from different bodies and countries, enabled Egypt to pay off its outstanding debts to several countries, donors and petroleum companies and increase its cash reserves.

The programme was aimed at improving Egypt’s credit rating and allowing it to implement development projects and improve its road and utility networks.

The conditions of the 2016 IMF loan included liberalizing the Egyptian currency exchange rates against foreign currencies, ending subsidies on many services and products provided to citizens, increasing tax revenues and reducing the role of the state in the Egyptian economy and encouraging the private sector through privatisation of some government companies.

As a consequence, average annual inflation hiked from 10.4 percent in 2015 to 13.8% in 2016, then to 29.5 percent in 2017- the highest level in the history of Egypt – before falling to 13.8% in 2018 and declining to 3.1 percent in October 2019.

As a result of the inflation from 2016 into 2018, the purchasing power of an average Egyptian shrank. At the end of the 2017/2018 fiscal year, 32.5 percent of Egyptians were living below the poverty line compared to 27.8% in 2015.

The IMF programme concluded with Egypt’s foreign currency reserves exceeding their highest historical levels and Egypt now has full access to international capital markets to meet its needs.

Egypt’s central bank reported that at the end of 2019, the country’s foreign reserves exceeded $ 44.5 billion.

Reportedly, Egypt will not opt for a new IMF loan; it is said to be confident that its economy is now robust enough. Egypt and the IMF are now discussing possible IMF technical support to the government economic reform agenda and structural reform programme aimed at reducing the size of bureaucracy.

It is understandable why the IMF has adjusted Pakistan in the Egyptian template as the issues of the two are almost identical.

The outcome so far noted in Pakistan is similar to that of Egypt with inflation hovering around 13 % in the first year and foreign exchange reserves getting better. If the Egypt trend is to be followed then the country is yet to experience worse in year 2 before it starts to get better in third year, whereas by the end of the programme, we could hope to experience an IMF-free Pakistan.

The weak link towards reaching the ultimate goal in Pakistan is the extent to which the people can sustain the hardships and its social and political consequences on Pakistan’s landscape. The opposition parties are out to cash in on the situation.

The government endeavours to dilute the hardships for the poor segments through utility stores, readily availability of basic eatable commodities in the market and action against hoarders are some favourable ad hoc remedies to respond to situation. More needs to be done in this regard and reforms programme is required to be expedited in areas that are lagging yet vital for the economic turnaround, notably, the energy sector and restructuring/privatisation of loss-making Public Sector Enterprises (PSEs).

The IMF programme has a great chance of success in Pakistan. In its first year, the programme is on track with expected results. However, the remaining two years are going to be more challenging than the first year.

(The writer is former President of Overseas Investors Chambers of Commerce and Industry)

Copyright Business Recorder, 2020



The Newspaper’s Correspondent March 01, 2020

ISLAMABAD: The World Bank will provide $36 million to Balochistan to help improve the quality of health and education services in four of its districts, it has been learnt.

The financial assistance consists of a credit of $21m and a grant of $15m. The World Bank is expected to approve the financing of the Balochistan Human Capital Investment project by the end of April.

The project will be addressing development barriers affecting both health and education sectors in Quetta, Chagai, Pishin and Killa Abdullah districts.

The two-pronged approach will improve utilisation and quality of critical public services that support the accumulation of human capital.

The low human capital index (HCI) in Balochistan is partially linked to 42 per cent poverty rate and socio-cultural norms that affect demand for and utilisation of health and education services in the province.

Human capital in the province is low due to the underlying socio-cultural, economic and development challenges, the bank’s project inception report says.

The lack of awareness about benefits of utilising quality health and education services, along with safety concerns, especially for females who are not allowed to travel alone, results in low utilisation of essential services that are critical to achieving better human development outcomes.

Published in Dawn, March 1st, 2020




Iftikhar A. Khan Updated February 18, 2020

ISLAMABAD: The International Monetary Fund (IMF) came under fire in the Senate on Monday for “attempts to dictate foreign policy” to Pakistan, with opposition lawmakers urging the government to disclose what had been agreed with the fund’s team which recently visited the country.

Speaking on an adjournment motion, Senator Javed Abbasi of the PML-N said news reports published when the government-IMF talks were under way revealed that the IMF team asked Pakistan to cut trade and commerce reliance on China.

“After getting prices of essential commodities and tariffs of gas and electricity, will the IMF also dictate Pakistan what should be the nature of its relations with other countries,” he said.

He asked the PTI government to explain what transpired in the talks, what pressures were being exerted and what assurances had been held out to the IMF behind the scene.

He said China had invested at a time when nobody was ready to do it and Pakistan was faced with problem of acute power shortage. He said energy and motorway projects were being undertaken and work on Gwadar port was also under way. He sought an explanation from the government if it surrendered on foreign policy before the IMF.

Mushahid Hussain Sayed, who was also a mover of the motion, pointed out that the government had not formally contradicted or denied the media reports. “It’s an infringement on sovereignty of Pakistan and a blatant interference by an international organisation based in Washington,” he said.

He regretted that some irresponsible and immature ministers tried to bring in question efficacy, quality and success of the CPEC. “CPEC is about the future of Pakistan. It’s not linked with any person, party, province or government. It’s a national strategic project on which there is a broad national consensus,” he remarked.

PPP leader Raza Rabbani said soon after the PTI government came into power, Adviser to the Prime Minister on Commerce Abdul Razak Dawood talked about putting the CPEC project on the backburner for one year.

He recalled that in July 2018 US Secretary of State Mike Pompeo had cautioned the IMF against a fresh bailout package for Pakistan’s new government to pay off Chinese lenders who have invested in the CPEC.

He regretted that the conditionalities agreed upon with the IMF had not been brought to parliament and claimed that details of CPEC projects had been shared with the IMF.

Nauman Wazir of the PTI said there was no doubt that China has provided $11 billion to Pakistan in two years and agreed that looking at your neighbour for investment was the best option. He, however, said some loans under the CPEC had been poorly negotiated. He claimed that the mark-up on some of the loans was as high as 22 per cent.

Minister for Parliamentary Affairs Azam Swati, while winding up the discussion, did not directly deny the reports about IMF’s demand concerning ties with China but said no conspiracy was being hatched against China. He said the IMF hailed the current policy and called for continuity of fiscal discipline.

After the minister’s remarks, the opposition staged a walkout from the house as a mark of protest against the absence in the house of the adviser to the PM on finance to clarify the report about IMF’s demand.

The quorum was pointed out after opposition’s second walkout of the day. Quorum bells were rung but to no avail and the house was prorogued sine die.

Earlier, the opposition had also staged a walkout to protest government’s failure to bring the FIA report on wheat flour and sugar crisis in the house as directed on Friday by Senate Chairman Sadiq Sanjrani.

Minister Swati told the house that the report submitted by the FIA had been sent back by Prime Minister Imran Khan with queries and observations. He promised that the revised and comprehensive report will be shared with the house during the next session.

The Senate passed a resolution asking the government to immediately place the FIA inquiry report about the wheat crisis before the house, so that people of Pakistan are able to identify the main culprits responsible for creating the crisis.

“This house condemns the recent wheat and flour crisis, this unprecedented rise in the prices of both commodities and the resultant record inflationary trend in the country has broken the back of masses which clearly shows the non-serious attitude, incompetence and negligence of the incumbent government and its inability to provide relief to the people,” the resolution reads.

Published in Dawn, February 18th, 2020



By RECORDER REPORT on February 18, 2020

The International Monetary Fund’s (IMF’s) press release on the completion of the second review under the 6 billion dollar 39-month Extended Fund Facility programme mission has generated some confusion by providing ample fodder for the government in its own defence as well as its detractors. Thus, while the government would focus on the statement that “all end-December performance criteria were met, and structural benchmarks have been completed” yet detractors would point to the next sentence that states that “steadfast progress on programme implementation will pave the way for the IMF Executive Board’s consideration of the review” – a comment that underscores the need for progress to meet the targets that would enable the mission to recommend to its Board to approve the release of the third tranche and represents a change from the norm adopted in previous IMF programmes with this country when even waivers were granted for unmet targets. The reference to continued progress is perhaps with regard to prior conditions for the next disbursement that the government may have assured the Fund mission would be met soon. This view is strengthened by the fact that the mission leader is quoted as having stated that “in the coming days progress will continue to pave the way for the IMF Executive Board’s consideration of the review,” though he, unlike official statement, did not restate that “all end-December performance criteria were met and structural benchmarks have been completed.”

During the first review, it was noted that the release of budgeted allocations for social sector development were less than one percent during the first quarter of the year and less than 9 percent for Public Sector Development Programme; prompting the Fund to state that “the authorities remain committed to expanding social safety nets, reducing poverty and narrowing the gender gap.” Benazir Income Support Programme, renamed Ehsaas Kafaalat Programme, received much less than budgeted allocations till end-December 2019 because a fresh survey was undertaken to secure due rights of the deserving by making the process apolitical. If the government does release the entire 190 billion rupees budgeted for social sector development as well as the remaining amount budgeted for PSDP the primary surplus of 0.7 percent, as indicated in the IMF press release may well go into the negative. The mission leader’s statement notes that development and social spending have been accelerated though exactly by how much as the first review disbursements were paltry has not been mentioned.

The mission leader also noted that “the current account deficit has declined” and there is no doubt that it has declined and what is generally acknowledged is that it needed to decline on an emergent basis; but he added that this decline was “helped by the real exchange rate that is now broadly in line with fundamentals,” – a statement that extends limited support to the State Bank of Pakistan’s (SBP’s) clarification to Business Recorder that the exchange rate is in line with fundamentals but falls short of actually stating that the REER calculated and uploaded on its website by the SBP has no policy relevance as it is merely an indicative target. The mission leader’s quote also notes that “international reserves continue to build at a pace considerably faster than anticipated,” brought about by the discount rate, at 13.25 percent, that has lured 3 billion dollars in carry trades into short-term government securities.

The mission leader further noted that ‘inflation should start to see a declining trend as the pass-through of exchange rate appreciation has been absorbed and supply side constraints appear to be temporary.’ The operative word is “appear” and in this context, the Sensitive Price Index figures released by the Pakistan Bureau of Statistics (PBS) on Friday reveal that there has been a rise in inflation to 16.38 percent year-on-year; however, week-on-week it has declined – a figure that can be challenged on the basis of patently evident discrepancies, for example, wheat flour price quoted by the PBS is at 45.44 rupees per kg which is questionable as wheat is actually 54 rupees per kg on the market.

The Fund’s insistence on full cost recovery, a sound economic policy, is unfortunately also fuelling inflation through the failure of the government to improve governance in the power and gas sectors and instead relying almost exclusively on raising rates, passed on to the consumers, to meet this objective. In recent weeks, the Prime Minister appears to have withdrawn his unconditional support for this strategy adopted in the name of improved governance in the power sector no doubt due to ever raising rates.

The mission leader also acknowledged that “fiscal performance in the first half of the year remained strong,” though the budgeted tax revenue target remains unmet with a widening shortfall with each passing month. Insiders claim that the government has pledged to raise taxes by 200 billion rupees in the current year while others suggest that the government has convinced the Fund team that it will raise non-tax revenue by a whopping 1,500 billion rupees, a claim that was also made during finance advisor’s maiden speech to parliament last week, and that more taxes with the commitment to widen the net will be part of budget 2020-21. There will, however, be greater clarity once the actual second review report is prepared, put up for consideration of the IMF board and the third tranche released, with the report then uploaded on its website.

Copyright Business Recorder, 2020



The Newspaper’s Reporter Updated February 22, 2020

ISLAMABAD: The Asian Development Bank (ADB) disbursed record $2.4 billion in development assistance to Pakistan in 2019 including $1.8bn in programme lending and $634.3 million in project lending.

According to its year-in-review document released on Friday, the ADB disbursed $1.8bn in policy-based loans including $1bn in immediate budget support to shore up the country’s public finances and $500m to improve trade competitiveness.

The bank also provided additional financing of $200m to help support the Benazir Income Support Programme — part of the government’s flagship ‘Ehsaas’ Poverty Alleviation Strategy aimed at reducing inequality and investing in economically disadvantaged people.

The ADB also approved a $235m loan for Sindh in 2019 to help develop a bus rapid transit (BRT) system with innovative energy and climate resilience features in Karachi – Pakistan’s largest and most-populated city. The bank also approved a $75m project to enhance secondary education in Sindh.

To help strengthen project readiness prior to approval, the ADB also approved project readiness financing totalling $17.3m in 2019 for the Cities Improvement Project in Khyber Pakhtunkwa and the Water Resources Project in Punjab.

In agriculture, the ADB approved a major change in scope of Trimmu and Panjnad barrages adding Islam Barrage by utilising surplus loan proceeds of $21m, and initiated work on $275m Jalalpur Irrigation Project.

The development bank approved a $5.1m grant for enhancing Punjab technology-based agriculture and marketing, market development and preparing Kurram Tangi Integrated Water Resources Development Project.

In the energy sector, the ADB maintained its strong presence with an ongoing portfolio of $2.2bn covering energy generation, transmission, distribution, energy efficiency, renewable energy development, and analytical tools and advisory assistance.

In 2019, the ADB committed a $300m policy-based loan that will help Pakistan address financial sustainability, governance, and energy infrastructure policy constraints.

The ADB’s ongoing portfolio in the transport sector totals $2.5bn and spans urban corridors, border crossing points, green-field motorways and expressways, and existing national and provincial highways. In 2019, the development bank also committed a $75m loan to widen and upgrade 42km of the busy Mardan–Swabi road in Khyber Pakhtunkhwa.

The ADB successfully completed the flood emergency reconstruction and resilience project, under which 1,740 km of provincial highways and districts roads were rehabilitated and repaired in 20 flood affected districts of Punjab.

Another 204km of major roads were rehabilitated, and 75km of district roads were repaired in the three districts. About 800 hectares of landslide area was stabilised in the three northern districts using bio-engineering measures. The project also rehabilitated 90 per cent of flood protection infrastructure.

Published in Dawn, February 22nd, 2020



Reuters Updated February 23, 2020

RIYADH: The world’s top economies called on Saturday for a coordinated response to the coronavirus outbreak, which the International Monetary Fund (IMF) predicted would lower China’s growth this year to 5.6 per cent and shave 0.1 percentage points from global growth.

IMF Managing Director Kristalina Georgieva presented the outlook to central bankers and finance ministers from the Group of 20 countries, but said the IMF continued to look at more dire scenarios. The China outlook is 0.4 percentage points lower than it was last month.

China reported a sharp fall in new deaths and cases on Saturday, but the World Health Organization (WHO) warned it was too early to make predictions about the outbreak and said it was concerned about the number of new infections in other countries with no clear link to China such as travel history or contact with a confirmed case.

“In our current baseline scenario, announced policies are implemented and China’s economy would return to normal in the second quarter. As a result, the impact on the world economy would be relatively minor and short-lived,” Georgieva said.

G20 sees need to coordinate coronavirus response

“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted.”

China, which was represented at the G20 meeting by its ambassador to Saudi Arabia as senior officials stayed away due to the growing crisis over the virus, has said it could still meet its economic growth target for 2020 despite the epidemic.

Japan’s finance minister said almost all the G20 countries mentioned the risk posed by the coronavirus during the gathering in Riyadh and that he had warned of a serious impact on the global economy if it spreads further.

“But it’s hard to grasp what is happening as there’s relatively little information. I can say today’s participants called for the need to coordinate (in responding to the virus impact),” Taro Aso told reporters.

The latest draft communique gives less prominence than an earlier version to the outbreak as a growth risk, saying only that the G20 would “… enhance global risk monitoring, including the recent outbreak of COVID-19,” the medical acronym for the coronavirus.

A source familiar with the discussions said the G20 countries had not made plans for any separate committee or meetings to coordinate a response.

Georgieva said the Chinese authorities were working to mitigate the negative economic impact with crisis measures, liquidity provision, fiscal measures and financial support.

“While the impact of the epidemic continues to unfold, the WHO’s assessment is that with strong and coordinated measures, the spread of the virus in China and globally can yet be contained and the human tragedy arrested,” she said.

The coronavirus outbreak may curb demand for oil in China, which has reported more than 2,000 deaths, and other Asian countries, further depressing oil prices, industry body the Institute of International Finance has said.

Georgieva said global cooperation was essential to containing the virus and its economic impact, particularly if the outbreak turned out to be more persistent and widespread.

She said it was imperative to recognise the potential risk for fragile states and countries with weak health care systems, adding that the IMF was ready to provide grants for debt relief to its poorest and most vulnerable members.

Published in Dawn, February 23rd, 2020




By RECORDER REPORT on February 10, 2020

President Pakistan Businessmen and Intellectuals Forum (PBIF), Mian Zahid Hussain has emphasized the need that the IMF conditions must be revisited and relaxed otherwise, the government will find it increasingly difficult to abide by the agreement puutting IMF’s targets at stake He said IMF harsh conditions should not be allowed to become a threat to the economy.

IMF programme has reduced current account deficit and strengthened forex reserves to some extent but it has compromised growth rate, production, businesses and employment while runaway inflation has affected almost everyone, he said.

Mian Zahid Hussain said that reports regarding insistence by IMF to increase taxes are disturbing. If increasing taxes has become necessary, the government should target sectors which are not paying taxes since the last seventy years

He said that growth rate has been reduced by over fifty percent to get six billion dollars from the lender resulting in massive bankruptcies and massive unemployment.

He noted that after the IMF deal, rupee saw record erosion in its value but it hasn’t helped to improve the exports as expected while the public debt rose to unsustainable levels.

Moreover, the interest rates are not allowing business to run which must be noticed, he mentioned. He said that the reason behind IMF’s strict stance is the failure of the successive governments to reform power sector and tax administration and sell companies inflicting heavy losses due to political considerations.

Now these three sectors have become a major problem for the country wasting precious resources, he said, adding that all the losses of the power sector are being diverted to masses which has destabilised household budgets and added to woes of the industrial sector.

Copyright Business Recorder, 2020



By ​ Our Correspondent Published: February 10, 2020

ISLAMABAD: An International Monetary Fund (IMF) delegation on a visit to Pakistan to evaluate Islamabad’s performance for the third tranche of $450 million of the $6 billion bailout package will resume talks with government officials after a two-day break from Monday (today).

The three sessions of talks on Monday will start at 9am and last till 5pm.

The IMF team will be informed about the progress made by the State Bank, finance ministry, commerce ministry and the FBR on the targets set by the global lender.

Talks between Pakistan and the IMF for the second quarter (October-December) 2019-20 began on February 3. Finance Adviser Dr Abdul Hafeez Shaikh kicked off the review talks with his counterpart Ernest Rigo, the IMF’s Washington-based mission chief.

FBR authorities are resisting the IMF’s demand for a mini-budget. They are seeking a steep cut of nearly Rs800 billion in its original target of Rs5.5 trillion.

The IMF has already lowered the target to Rs5.238 trillion and is not inclined to give any further relaxation until Pakistan takes additional measures.

Pakistan is required to take additional revenue measures to the tune of nearly Rs200 billion aimed at achieving an under discussion revised tax collection target. In July last year, the IMF had given Rs5.5 trillion tax collection target to the FBR, backed by Rs735 billion tax measures. The new tax measures were equal to 1.7% of the GDP.

However, sources said from July to December of this fiscal year, the net impact of these revenues measures on tax collection was just Rs235 billion or 0.5% of the GDP. The gross collection from these measures was in the range of Rs265 billion but the FBR still has to adjust close to Rs35 billion tax refunds of the zero-rated sectors.

Due to a shortage of time before the close of the fiscal year, the only major revenue spinner that remains is to increase the standard General Sales Tax (GST) rate from 17% to 18%, which is highly inflationary and politically very risky.

But the FBR has not yet seriously considered this proposal, although it remains on the table.

The tax authorities blame sluggish economic growth, reversal of certain tax measures and delay in enforcement of administrative measures like computerised national identity cards. However, there were also questions over the method that the FBR uses to work out the revenue impact of these numbers.

Major revenue spinners during the first six months of the fiscal year remained telephone bills, salary, profit on debt and property transactions. On the sales tax side, collection from petroleum products and textile products helped in raising the additional revenues.

The additional impact of increasing income tax rates for salaried class was Rs25 billion in the first half while the increase in property valuation rates also contributed Rs27 billion more.

However, the net impact of Rs60 billion worth of additional custom duties measures remained negative, although the FBR’s collection from import of LNG significantly improved. The revenue impact of additional custom duties remained negative due to compression of imports.

The FBR missed the first seven months (July-January) revenue collection target by Rs385 billion despite imposition of Rs735 billion record new taxes. However, the FBR still believes it has done a remarkable job in the given economic conditions.



By NAVEED BUTT on February 11, 2020

Pakistan People’s Party (PPP) Chairperson Bilawal Bhutto-Zardari called upon the ruling Pakistan Tehreek-e-Insaf (PTI) to review government’s agreement with the International Monetary Fund (IMF). The PPP chairperson expressed these views, while talking to media persons in his chamber at the Parliament House on Monday.

He alleged, “The PTI government has handed over big institutes to the IMF. The PTI government and IMF had prepared budget 2019-20 and we were against it from day one.”

Bilawal said that from day one the PPP was against the “connivance” of the government and the IMF.

“The failed and incapable government has made an agreement with the IMF which is against the people of Pakistan which hurts the interests of Pakistani people,” he said. “The government will have to review the deal with the IMF,” Bilawal demanded.

He claimed that the government had signed a bad deal with the IMF and the “incompetent people” did not know how to strike a good deal.

Bilawal accused the government of compromising on the interest of the people by holding talks with the IMF.

He said that crime were on the rise due to the worst-ever economic situation and increasing inflation in the country. Bilawal said that the people were in a miserable condition due to price hike.

He said that the speaker should fix a day to start debate on the burning issue of price hike in the National Assembly.

He said that the government was making legislation (ordinances) through the Presidency instead of the Parliament.

Bilawal claimed that Parliament was being misused and resolutions were being passed for own interests. “The government is being run through ordinances,” he stated.

“The parliament should be shut down, if the government is to be run through ordinances,” Bilawal said. The PPP chairperson claimed that the law and order situation in the province was getting affected due to the issue of Sindh inspector general’s appointment. He said, “The federal government was deliberately using wrong procedure on the matter of appointment of the new IG Sindh.”

Bilawal said, “We hope that the prime minister would resolve the issue of the IG this week.” Bilawal said that the National Accountability Bureau (NAB) should hold those people accountable who were creating flour and sugar crises in the country.

He said that the flour crisis had risen after 10 years.

Bilawal said that the opposition was not given a chance to explain its position on the PMDC ordinance. He said that every political party should have the opportunity to present its position in the parliament.

Bilawal said that the text of the PMDC ordinance contradicted the interests of the doctors. “Our medical students are worried and we are the voice of these students,” the PPP chairperson said.

He said that the people were upset when the government brought out the ordinance. Bilawal said that the opposition wanted to explain why young students in the country were strongly opposed to the PMDC ordinance.

He said that the ordinance weakened institutions. Regarding Maryam Nawaz Sharif, PPP chairperson said that he hoped that Maryam Nawaz was fulfilling the demands of her political position. He said that the focus of Maryam Nawaz Sharif at the moment was the health of her father.

“Maryam not being allowed to meet her ailing father is a violation of human right,” Bilawal said.

He demanded of the government to allow Maryam Nawaz to visit her father in England.

Bilawal said that he would state his position on Ehsanullah Ehsan in his speech in the National Assembly.

The escape of Ehsanullah Ehsan is a proof of the government’s incapability and failure, he said. Imran Khan and other political parties in the past did not support PPP’s stance against terrorism and extremism, he claimed.

Copyright Business Recorder, 2020



By DR HAFIZ A PASHA on February 11, 2020

The article last week by me had assessed the projections made for 2019-20 by the IMF staff following the First Review. This article analyses the projections for the last two years of the Program, 2020-21 and 2021-22. The IMF projections for the next two years are compared with the projections which emerge from the Macroeconomic Model of Pakistan built at the Beacon house Center for Policy Research (BCPR). This model has 73 equations and is of a recent vintage. It is based on time series data from 1990-91to 2018-19.

The macro economy is driven by some key variables like the exchange rate, interest rate, level of fiscal effort in the form of additional taxation, level of development , defense and other spending, sources of financing of the budget deficit, level and composition of external borrowing for meeting the external financing requirements of external debt repayment and the current account deficit.

The surprise is that the IMF has opted to make big changes in some of these variables on the basis of developments in the economy in the short period of five months from July to November 2019. The changes in the projected exchange rate are shown in Table 1.

The real effective exchange rate is now expected to fall less in 2020-21 and 2021-22. The earlier projection in July 2019 had projected that the real effective exchange rate would fall cumulatively from 2018-19 to 2021-22 by over 15 percent. Now, it is anticipated that the extent of depreciation will be much less at 7 percent over the three-year period and the rupee could actually appreciate in 2021-2022. This is perhaps due to the optimism resulting from a much faster decline in the first six months in the current account deficit from July to December 2019 of 75 percent. The earlier exchange rate depreciation has, no doubt, played a major role in reducing the current account deficit.

(ii) The nominal interest rate, as measured by the cost of domestic debt servicing, is also projected at a lower rate in each year, as given in Table 2.

(iii) There has been only a marginal change in the level of fiscal effort in the Program Period. The earlier projection was that the tax-to-GDP ratio would have to be raised from 11.6 percent in 2018-19 to 17 percent by 2021-22. Now the terminal year target has been reduced by 0.3 percent of the GDP to 16.7 percent of the GDP.

The above changes clearly highlight that the IMF has realized that stabilization of the economy will require less intensive use of policy instruments, especially the exchange rate and the interest rates. However, the targeted increase of over 5 percent of the GDP in the tax-to-GDP ratio in three years remains well beyond the realm of possibilities.

The BCPR Macroeconomic Model has been given the input of the above variable magnitudes, with the only change that the target increase in the tax-to-GDP ratio will be 3 percent and not over 5 percent of the GDP.

The resulting projections of key macroeconomic variables which emerge by simulation of the model are compared below with the latest projections by the IMF. First, a comparison is made of the projected current account and budget deficits. The projections of the current account deficit are as follows:

Therefore, the IMF projections are on the optimistic side given the exchange rate projection. Exports are expected to show cumulative growth of 23 percent from 2018-19 to 2021-22, while imports will fall by 2 percent. However, the model forecasts that exports will rise by 14 percent over the three-year period, while imports could rise, not fall, by 7 percent. Consequently, the current account deficit will be $2.1 billion larger than the level anticipated by the IMF in 2020-21 and by $5 billion in 2021-22. There is a real risk that the stabilization process could unwind by 2021-22.

Why are imports, in particular, likely to be significantly higher? According to the model, for every 1 percent increase in the real GDP, imports rise in volume terms by 0.9 percent. If, as projected, the GDP cumulatively increases by almost 10 percent over the Program Period, then this would imply that imports would rise by 9 percent due to the income effect. The devaluation of the rupee will create a negative price effect on imports of 0.2 percent for one percent depreciation in the exchange rate. It appears that the projected level of imports will be higher, because the positive income effect will dominate over the negative price effect, given the extent of depreciation projected of the Rupee.

We turn now to the projected primary deficit in the Budget. Therefore, given a more feasible increase in the tax-to-GDP ratio the primary deficit is likely to be significantly larger. It is likely to be transformed only into a surplus only in 2021-22.

The slower pace of stabilisation will have significant implications by 2021-22 on key variables like the foreign exchange reserves and level of external debt. The IMF staff projection is that foreign exchange reserves will reach $ 20.7 billion by 2021-22. However, the BCPR Model expects reserves to be limited to $11.7 billion only in 2021-22.Therefore, the objective of achieving sufficient stabilization of the economy by the end of the Program to enable the economy to move on a trajectory of higher growth may not be achieved.

The IMF has clearly has made significant changes in six months in terms of the intensity of use of key stabilization variables. The BCPR Model indicates that the optimal stabilization strategy is, first, adherence to the new exchange rate projection for 2019-20 and somewhat higher than the original percentage increases in 2020-21 and 2021-22 of 6 and 5 percent respectively. Second, the new lower level of interest rates can be lowered further by 1 to 2.5 percentage points, as the Program proceeds, in view of the falling rate of inflation in later years. Third, the Program should aim for the increase in the tax-to-GDP ratio of 3 percent of the GDP by 2021-22. This will make the Program more feasible and increase the probability of stabilization being achieved, thereby enabling the economy to move on to a trajectory of higher growth.

(The writer is Professor Emeritus at BNU and former Federal Minister)

Copyright Business Recorder, 2020



By Irshad Ansari Published: February 11, 2020

ISLAMABAD: The International Monetary Fund (IMF) is not happy with performance of Pakistan’s top taxman – the Federal Board of Revenue (FBR) – which has requested the international lender to further reduce tax collection target set for the FBR.

After conclusion of talks on technical level, Islamabad on Monday began policy level negotiations with an IMF delegation for the third installment of $450 million IMF loan.

The Ministry of Finance started the talks to considered proposals to give more autonomy to the National Electric Power Regulatory Authority (Nepra) and Oil and Gas Regulatory Authority (Ogra) – both regulatory authorities – as well as to discuss policy to achieve goals.

According to sources privy to the meeting, the IMF delegation put emphasis on achieving the tax targets by increasing the non-tax revenue.

“The government team, however, said loss making state-run institutions will be privatised for generating non-tax revenue. The FBR requested the IMF to further reduce the tax collection target,” a source told The Express Tribune.

Pakistan and IMF review mission in Nov 2019 agreed on downward revision of the FBR’s tax collection target to Rs5,270 billion. The earlier envisaged tax collection target was Rs5,503 billion for 2019-20.

In the first phase of policy level talks on Monday, top officials of the FBR, Ministry of Energy, Nepra, Ogra and the Ministry of Privatisation were also present.

The sources said the FBR said that the new taxes and hike in interest rate would increase inflation. However the IMF team was not in favour of the idea of reducing the tax collection target.

They said the IMF team expressed dissatisfaction over the FBR’s performance.

The government told the IMF team that it would privatize loss making entities. In the first phase six institutions will be privatized and later 27 institutions will be privatised.

The Finance Ministry informed the IMF that electricity and gas prices would not be raised. “An Integrated system will be introduced to increasing electricity and gas prices,” the source added.



The Newspaper’s Staff Reporter Updated February 12, 2020

KARACHI: Talks with the IMF continued as discussions revolved around the need to further revise the revenue target downward. Multiple sources from within the talks confirmed to Dawn that the FBR has proposed up to Rs4.7 trillion as the maximum amount that can be collected this fiscal year whereas the IMF is asking it to aim for Rs4.9tr instead.

The gap implied fresh revenue measures totaling Rs200 billion that would need to be announced in the near future if the authorities fail to convince the fund of their limitations.

The revenue target for the FBR was originally set at Rs5.5tr in the budget for FY2020. It was then revised downward to Rs5.23 billion in the first review that concluded in December 2019. By the end of that year the revenue authority anno­unced a growing shortfall of Rs287 billion in the first six months of the fiscal year.

A few days later the government’s financial advisor paid his first visit to the FBR headquarters in which he reportedly expressed displeasure at this growing shortfall, telling the officers and chief of the revenue authority that continued shortfalls meant either fresh revenue measures to squeeze out more taxes from an already overburdened citizenry and business community, or mounting debt.

Published in Dawn, February 12th, 2020



By RECORDER REPORT on February 12, 2020

Emir of Jamaat-e-Islami Senator Sirajul Haq has lamented the government for handing over the country to the IMF and announced to organise masses against the policies of the PTI regime.

Talking to the media after addressing a training workshop of the JI workers at Mansoora on Tuesday, he said a so-called anti-corruption campaign continued in the country with the strong impression of political victimization.

Why the prime minister was unable to order an investigation into the hike in prices of sugar and shortage of flour, he questioned, maintaining everyone knew the fact that those who created the crises earned billions in couple of days and were close and dear ones to the PM himself.

The JI chief said the all the claims and promises made by the PM to the people during the election campaign about starting a ruthless accountability after coming into power were proved a pack of lie. How could a chief executive of a country surrounded by corrupt, inept and selfish advisers and associates talk about the transparent and powerful accountability drive, he questioned.

“The economy is heading toward the huge wreck. The IMF team is preparing the next budget,” he said, adding the prime target of the budget would be the timely payment of Rs 2,900 billion interest to the lending agencies on the foreign debts and liabilities. The development budget, he added, was only hovering around Rs 700 billion. He said the IMF was running the affairs of Pakistan similar to the style of the East India Company.

This government, said the Senator, after completely destroying the economy was now bent upon selling the state entities on the behest of the international lending agency.

“The JI will resist the privatization move of the PTI government and organize public against its policies,” he announced.

Siraj said the country was gifted with enormous natural resources and human capital. There was a dire need to utilize these gifts of nature for the greater benefit of the poor people of Pakistan.

He said the interest free economy was the key to lead the country on the path of development. The JI, he vowed while addressing the participants of the training workshop, would turn Pakistan into a true Islamic welfare state and introduce key reforms in every sector if voted to power.

Copyright Business Recorder, 2020a



The Newspaper’s Staff Reporter Updated February 13, 2020

ISLAMABAD: Pakistan Peoples Party (PPP) chairman Bilawal Bhutto-Zardari has urged the government to renegotiate with the International Monetary Fund (IMF) while keeping the people’s interests supreme.

“If you have to negotiate with the IMF, we agree that you must, but while doing it, you should at least not compromise on the economic independence of the country, rather protect the rights of the people,” the PPP chairman said while talking to reporters outside the Parliament House here on Wednesday.

He said the manner in which this “incompetent team” had carried out the negotiations with the IMF was wrong. He said the way the economy was being run and this IMF programme had been implemented, “they are squeezing the life out of our economy”.

Mr Bhutto-Zardari said there had been no positive impact because of the whole IMF programme, regretting that the main focus of the present government was to pay back the money to the IMF.

Says country’s economic independence, people’s interests be kept supreme

“I respect the finance minister (adviser) very much as he always talks with respect but he is not an elected representative,” he said. He said instead of quoting the reports of the IMF and the World Bank, the adviser should ask the people of Pakistan if they believed that Pakistan’s economy was progressing.

The PPP chairman said that during his speech in the National Assembly on the issue of price hike, he had quoted the official statistics to highlight the wrong economic policies of the government, but “what did we get as an answer, we got foul language”.

“This government does not talk on issues. It gets personal, and it cannot tolerate criticism,” he added.

Responding to a question, Mr Bhutto-Zardari said that being a democratic politician, he believed that if the government had to leave, then new elections would have to take place as they would not accept any other system.

In response to another question, he said when Dr Hafeez Shaikh had negotiated with the IMF on behalf of the PPP government, they did not listen to the demands of the IMF. He claimed that the IMF had called for increasing the power tariff, but the government at that time had refused to do so as it did not want to compromise on the economic rights of the people.

Published in Dawn, February 13th, 2020



By Shahbaz Rana Published: February 14, 2020

ISLAMABAD: Pakistan and the International Monetary Fund on Thursday extended review talks for at least one more day after both the sides failed to break a deadlock over the contentious issue of increase in electricity tariffs, mini-budget and Chinese loans.

Talks between Pakistan and IMF had started on February 3 and were planned to end on February 13 (Thursday). But neither the finance ministry nor the IMF issued a handout as the Pakistani authorities continued their internal discussions till late in the evening.

Talks would continue on Friday, said a senior government official.

“There is no planned interaction with the media until the discussions are finalised,” said Teresa Dabán Sanchez, the Resident Representative of the IMF in a terse response to The Express Tribune.

She was requested to comment whether the talks were extended beyond scheduled time of February 13 and when the talks were expected to conclude.

Unlike the feel good factor that the Pakistani authorities tried to create on Wednesday through the media, both the sides remained poles apart till Thursday evening due to differences over the thorny issues of increase in electricity prices and additional tax measures that are needed to bridge the projected shortfall.

Successful culmination of talks would pave the way for the release of the third loan tranche amounting to $450 million and will also ensure continued inflows from multilateral lenders.

The PTI government that was already under public pressure due to skyrocketing inflation was reluctant to increase electricity tariffs and impose Rs200 billion additional taxes.

In his first detailed speech on the floor of the National Assembly, Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh warned on Wednesday that the PTI government was likely to fail, if it did not take corrective economic decisions.

The IMF did not fully accept Pakistan’s position on cutting expenditures and relax quarterly ceilings on the central bank’s profits to compensate the shortfall, according to Pakistani authorities.

The IMF did not accept the proposal to cut the PSDP spending and savings from some of the welfare programmes.

The top economic team was also of the opinion that there was a need to take sustainable revenue measures instead of relying on one-off measures.

The IMF did not budge from its demand of additional revenue measures to take the overall FBR’s collection close to Rs5 trillion, the sources said.

They added that another concern of the IMF was that steep shortfall in the FBR’s collection would undermine the provincial cash surpluses, which in turn could lead to missing the annual primary deficit target.

Punjab’s Finance Secretary Abdullah Khan said that generating cash surpluses was linked with the FBR’s ability to achieve its annual target. The IMF has estimated Rs348 billion cash surplus for the current fiscal year.

The sources said the IMF also did not accept the government’s plan to freeze electricity tariffs for the next at least one to one-and-half-year.

They said that the government was of the opinion that some of the one-off electricity tariff-related measures that had been taken in the past would end in next eight months.

Until the one-off electricity adjustments measures end, the government is reluctant to further increase the prices.

The IMF also had serious issues with the circular debt reduction management plan, prepared by the Ministry of Energy. The plan is heavily tilted towards increasing electricity prices to recover the cost instead of reducing the cost of generation.

According to media reports, the debt swelled to Rs1.9 trillion – over 66% or Rs800 billion added by the PTI government in the past one-and-half years.

The sources said the IMF had also issues with repayment of the Chinese loans. As per the understanding at the start of the programme, all the Chinese loans were required to be rolled over by Pakistan.

However, in September last year Pakistan returned a Chinese commercial loan of $700 million to the China Development Bank. But the CDB relend the loan to Pakistan in December last year again.

A major Chinese repayment was also due in the last quarter and the IMF has asked Pakistan to make sure to get it rollover before the end of the current fiscal year.



Kazim Alam Updated February 15, 2020

KARACHI: International Mon­etary Fund (IMF) Deputy Director Athanasios Arvanitis said there is no magic bullet for lifting emerging economies like Pakistan out of balance-of-payment (BoP) crises.

“When pressures are acute, solutions are not easy,” said Mr Arvanitis while addressing a seminar and panel discussion on managing crises in emerging markets at the State Bank of Pakistan (SBP) on Friday.

“There is no spending your way out of high public debt,” said the IMF official currently responsible for overseeing the loan programme of $6 billion in Pakistan. He added that few countries have managed to reduce their debt by running larger deficits.

This approach advocates fiscal belt-tightening and demand compression to overcome a recession. In contrast, Keynesian economists suggest governments should do the opposite by resorting to a heavy deficit spending amidst economic downturns.

“There is often a desire to delay the necessary adjustment. But delays make the crisis bigger,” he said, noting that reducing imbalances is difficult and carries an upfront cost.

Addressing the seminar, Macro Economic Insights CEO Sakib Sherani criticised the IMF for its poorly designed loan programmes for Pakistan.

“IMF programmes do not allow for structural reforms. How long does it take to fix the tax system of a country? To expect the Federal Board of Revenue to deliver a 45 per cent increase in the first year means you are not expecting it to reform. This need-for-speed is self-defeating,” said Mr Sherani.

He also accused the IMF of adopting the one-size-fits-all approach. There is a whole range of crises that emanate from terms-of-trade shocks, debt overhangs and monetary overhand, he said. “Yet the crises are dealt with similarly even though their genesis is very different.”

With regard to the oft-repeated mantra of creative destruction under capitalism, Mr Sherani said private firms in Pakistan are bearing the brunt of a bad policy framework.

He challenged the claim by the IMF and the government that the “burden of adjustment” — ie the fallout of policies aimed at compressing demand — is fairly distributed across different segments of society.

“The large part of the burden of adjustment (in the 2008 IMF programme) was actually borne by the people who were not in the BISP category, but in the lower middle income households. They faced steep increases in utility tariffs, in transportation fares. And they were completely uncovered and un-hedged,” he said.

In his address, Pakistan Business Council CEO Ehsan Malik said the SBP should reduce the key interest rate because the working capital cost is far in excess of what the industry can afford.

“You must have seen the corporate results at the end of December. All of them, barring the results of the banks, are looking south — and some of them, very significantly south,” he said.

He criticised the government for its many U-turns, including the recent one on the energy cost of exporters. “We still have a 100pc letter-of-credit margin requirement on industrial imports. I don’t understand its logic,” he said, noting that aside from the concessional funds for exporters, there has been no change in the country’s export policy. “It is exactly the same it was two years ago.”

SBP Governor Reza Baqir moderated the discussion. Business journalist Khurram Husain also spoke on the occasion.

Published in Dawn, February 15th, 2020



RECORDER REPORT February 16, 2020

KARACHI: Deputy director of International Monetary Fund (IMF) Athanasios Arvanitis has said that ongoing fiscal reforms will not only put Pakistan’s public debt path on a sustainable footing but also build the foundation for providing crucial funding to meet the targets.

While addressing a seminar on “Managing Crises in Emerging Markets”, hosted by the State Bank of Pakistan (SBP) in collaboration with Pakistan Business Council (PBC) in Karachi, he said that it is important for the government to focus on meeting the Sustainable Development Goals (SDGs) under the UN’s 2030 Agenda.

According to a press statement issued by the State Bank of Pakistan on Saturday, in a keynote speech, Arvanitis highlighted some of the main similarities of crises across emerging markets, notably the role typically played by elevated levels of debt, high public and external deficits, inflexible exchange rates, lack of competitiveness, low saving and investment and maturity and currency mismatches.

Despite these similarities, he emphasized that there was no one-size-fits-all model for managing crises. Instead, the IMF focuses on different dimensions while assisting a country in developing a homegrown stabilization programme, he added.

“The approach emphasizes the need to diagnose the roots of a country’s crisis, trends and developments in the balance sheets of various economic agents and their interconnectedness and country-specific dynamics that affect the political economy of reforms”, he added.

In terms of designing stabilization programmes, Deputy Director IMF stressed the importance of country ownership and measures to provide support for vulnerable segments of the population. He also drew parallels for Pakistan from the experiences of managing crises in other emerging countries.

In his welcoming remarks, Governor SBP, Dr Reza Baqir, stated that the objective of holding the seminar was twofold. First, to demonstrate that, in addition to its mandate of formulating monetary, exchange rate and financial stability policies, SBP endeavors to facilitate constructive debate on economic issues and is open to diverse points of view. Second, to highlight that Pakistan is not unique and there are many other emerging economies that have also faced economic crises and undergone difficult adjustments.

In the panel discussion, Ehsan Malik CEO of PBC presented the business community’s perspective on prevailing economic conditions and policies in Pakistan. While complimenting SBP’s adoption of a market-based exchange rate mechanism and the improving security situation in Pakistan, he highlighted the skewed tax burden on the manufacturing sector and the need to put in place a national tariff policy that prioritizes industrial promotion in the country instead of revenue generation. He also highlighted the business community’s concerns about the level of interest rates in the country.

CEO of Macro Economic Insights Sakib Sherani highlighted various factors that he said why Pakistan’s economic growth has historically not been steered towards a balanced trajectory despite the implementation of multiple IMF programmes. In particular, he drew attention to the under-appreciation of initial conditions and negative feedback loops while designing these programmes.

He agreed with the idea of adopting heterodox policies for managing crises and suggested that the efficacy of IMF programmes could be improved if they were longer, more back-loaded, and more heavily focused on structural conditionality rather than specific quantitative targets.

Khurram Husain, a renowned business journalist also sheds light on previous IMF programmes in Pakistan and argued that none of them were able to put the economy on a sustainable growth trajectory. Due to the availability of capital and financial flows driven by exogenous factors very soon after the start of those programmes, he said that the focus on addressing structural vulnerabilities always remained inadequate.

In particular, Pakistan’s tax base has remained narrow and exports have failed to expand and diversify.

He said that this has weakened the relationship between economic stabilization and growth, resulting in a recurrence of boom and bust cycles in Pakistan, whose brunt has fallen time and again on the poor.

The seminar closed with an interactive session with the audience, featuring questions related mainly on to how to transition from stabilization to growth by boosting Pakistan’s savings, increasing exports, boosting government revenues, developing agriculture and the financial system, improving the business environment, and harnessing financial inflows.



Mehtab Haider February 16, 2020

ISLAMABAD: The government will have to take ‘prior actions’ by placing a viable fiscal adjustment plan, hiking gas and power tariff and ensuring Chinese loans rollover in order to strike a staff level agreement with the IMF.

Now there are only two options available to the government: 1, to take prior actions in next two to three weeks; 2, request the IMF for completion of second and third reviews in May 2020 so that it could take corrective measures in the coming budget 2020-21 after which two tranches would be approved by the IMF’s Executive Board.“Now the ball is in the government’s court so it should take a decision without wasting time on the economic front,” said top official sources.

A top economist told The News on Saturday that the government had lost political capital because people were not ready to buy arguments to increase public utility tariffs and burden them with more taxes by holding the previous rulers responsible. The government also lost its capital in the eyes of the IMF because they reduced the FBR target during the first review so they were not ready to allow a further cut in the FBR target from Rs5,238 billion. “Only a miracle can save this IMF program,” said an official and added that it could only be done by delivering on the economic front immediately.

The staff-level agreement can only avoid the derailment of the IMF program. These prior actions can pave way for striking a consensus on staff-level agreement and then release of next tranche worth $452 million with the approval of the IMF Executive Board.

Top official sources confirmed to The News on Saturday that Pakistan would have to undertake prior actions over next two to three weeks as the staff level agreement in first 10 days of March 2020 could only pave way for signing Memorandum of Financial and Economic Policies (MEFP) and then consideration of Fund’s Executive Board for completion of second review and release of third tranche worth $452 million in April 2020.

“Now fingers are being kept crossed, as the government has a chance to comply with a prior action or satisfy the IMF through a strong viable plan paving way for striking a staff level agreement over the next two to three weeks,” said the official sources. The government had envisaged Rs5,550 billion revenue target that was reduced to Rs5,238 billion. Now the FBR is again asking for a further reduction and fixing it at Rs4,600 billion to Rs4,700 billion. This shortfall will be compensated through non-tax revenues as the increased profits of State Bank of Pakistan ballooned to Rs426 billion in first six months of the current fiscal against Rs63 billion in the same period of the last financial year.

Prime Minister Imran Khan had announced that the power and gas tariff would not be increased but the government will have to pass this burden partially on to the people because it is preparing a new power tariff plan, so it is yet to be seen whether new tariff plan can satisfy the IMF or not. On gas tariff, the proposed increase incorporated some arrears that resulted in an unprecedented hike so the exercise is underway to exclude arrears and then hike the gas tariff. Some Chinese loan rollover also became an issue for finalizing staff-level agreement with the IMF.

When this reporter contacted the IMF Resident Chief in Pakistan Teresa Daban Sanchez, she said, “Work and discussion continue. That happens at times that all the work is not finished in one visit and this is the usual type of message after this type of mission”.




By RECORDER REPORT on February 4, 2020

The Sindh government and USAID, in presence of Sindh Chief Minister Syed Murad Ali Shah, signed an agreement for launching a Project for Upgradation and Rehabilitation of Waste Water System PIL-11 for Jacobabad city at a cost of $40 million.

The work on the upgradation of waste water system has already been started before signing the agreement. Prior to the PIL-11, the USAID provided a grant of $22 million under which water supply scheme for Jacobabad was constructed to provide 14.5 MGD water to 350,000 people of Jacobabad. “I am thankful to USAID for giving these water and sanitation schemes to the people of Jacobabad,” the chief minister said and added the people of Jacobabad have a health institute (JIMS), water supply scheme and now they were getting waste water treatment scheme. “This is really a big day for the provincial government and the people of Jacobabad,” Shah said.

Under waste water management project the USAID has provided 88 refuse vehicles, garbage lifting trollies and other machinery which would be distributed very soon, said Qazi Mustafa Jamal while briefing the meeting.

The waste water scheme includes all tertiary drains, rehabilitation, including treatment of waste water through oscitation Ponds.On behalf of the USAID the Mission Director, Julie Koenen and on behalf of the Sindh government Chairman P&D Mohammad Waseem signed the agreement.

The chief minister said that on March 27 through a simple ceremony water supply scheme would be launched in Jacobabad city. Some 2000 water supply connection are being installed in different areas of the city through which over 350,000 people would be able to receive clean and safe drinking water.

The signing ceremony was witnessed by Chief Secretary Mumtaz Shah, Minister Local Government Syed Nasir Shah, Advisors to CM Murtaza Wahab, Mumtaz Jakhrani, acting consul general of USA Jack Hillmeyer, Programme Manager Kazi Mustafa Jamal, deputy commissioner Jacobabad and others.

Copyright Business Recorder, 2020



The Newspaper’s Staff Reporter February 05, 2020

KARACHI: The Pakistan Peoples Party (PPP) on Tuesday asked the federal government to renegotiate the deal with the International Monetary Fund (IMF) in line with the “country’s productivity and deliverability”, otherwise the party would launch a countrywide movement against the government from next month.

Speaking at the launching ceremony of the Peoples Urban Forest Programme in Lyari, PPP chairman Bilawal Bhutto-Zardari denounced the federal budget for 2019-20 as it was proposed and prepared by the IMF.

“We don’t accept this [government-IMF] deal,” he said. “The people of Pakistan don’t accept it. We ask the government to renegotiate its deal with the IMF. And the new deal should be made in line with the country’s productivity and deliverability. Otherwise what is happening now, it would further worsen. This ‘PTIMF deal’ had brought the flood of inflation, unemployment and the frustration among the people. We will not leave the ground and resist such anti-people moves. We will be launching a movement against this PTIMF deal from March,” he said.

Mr Bhutto-Zardari recalled policies of the PPP under its founder Zulfikar Ali Bhutto who came up with a novel idea of manpower export to create better employment opportunities for Pakistanis. The legacy, he said, was followed by former prime minister Benazir Bhutto bringing in the country more investments and introducing business-friendly policies.

“What this [PTI] government knows is how to snatch facilities from people,” he said. “Under the same agenda, they targeted the revolutionary Benazir Income Support Programme. First they removed the photo of BB Shaheed from its logo, then they changed its name and finally they removed some one million people from the list of those who were getting financial support from the exchequer. This puppet government can never come closer to people,” he added.

The PPP chairman blamed the federal government for cutting Rs140 billion fund of the Sindh government which had badly affected progress on the social development projects in the province. But still, he claimed, his party’s government in the province was trying to achieve its targets within the available resources calling its performance much better than in Punjab, Khyber Pakhtunkhwa and Balochistan.

Published in Dawn, February 5th, 2020



Amin Ahmed Updated February 07, 2020

ISLAMABAD: The Punjab government is seeking a loan of $180 million from the World Bank to implement its ambitious roadmap for public financial management (PFM) reforms that aims to strengthen the resource mobilisation in the province.

The total cost of the ‘Punjab Public Resource Management Programme’ has been estimated to be $304m including the World Bank loan for the project. It is expected that the bank’s executive board will take up the Punjab government’s request in August.

The proposed programme is considered to be very important as it will support the government of the largest province to align its PFM and tax systems with the federal frameworks and augment the impact of new PFM and tax administration practices through implementation and results at the level that most affects the citizens.

This will be a hybrid ‘Programme for Results’ operation with three key result areas under the results component and a technical assistance component to support investment in infrastructure and capacity

The programme is anchored in the Punjab government’s strategic development plans as guided by the Punjab Growth Strategy 2023 and the PFM Reform Strategy which is currently being updated based on the findings of Public Expenditure and Financial Accountability (PEFA) assessment.

The rationale for the World Bank to support Punjab’s PFM and revenue mobilisation efforts as well as improve the efficient and effective use of resources is compelling. By helping the largest province of Pakistan in terms of population and contribution to national GDP, to increase efficiency in its public expenditure, close its large tax gap and create fiscal for growth-enhancing expenditures on infrastructure and human capital, the programme can contribute to a transformal change in the country, given that the other provinces tend watch, replicate and emulate Punjab’s lead in reforms.

An inception report of the loan request says the reforms under PFM has been impressive, making the province expand its services sales tax base, completed digitalisation of urban property tax records, automated property tax invoice system and rural land records; and digitalised stamp duty payments in addition to transparency and efficiency in government spending was enhanced through implementation of citizens budgets; use of Punjab Procurement Regulatory Authority’s management information system for registering and processing contracts of more than 153 agencies, and innovative use of smart management tools to monitor district services in health, education and agriculture sectors.

However, despite this progress, there are several outstanding areas considered as binding constraints that Punjab must now tackle to achieve fiscal stability and efficient use of resources.

Published in Dawn, February 7th, 2020



Khaleeq Kiani Updated February 08, 2020

ISLAMABAD: With just 27 per cent actual expenditure in first seven months of this fiscal year, the International Monetary Fund (IMF) on Friday asked Pakistan to make full utilisation of development budget at the federal and provincial levels to support struggling economic growth.

Minister for Planning, Development and Special Initiatives Asad Umar told a press conference after a meeting with the visiting fund delegation that the IMF was asking for maximum efforts to fully utilise the allocations made for the Public Sector Development Programme (PSDP).

Responding to a question, the minister indirectly confirmed his unease with working under the Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh. Asked if he was attending meetings of the Economic Coordination Committee (ECC) of the Cabinet, Umar replied in the negative. “I think I cannot make any value addition to the ECC,” he said when asked why?

Umar is reported to have attended just a couple of meetings of Dr Shaikh-led constitutional committees since he was re-inducted into the federal cabinet on Nov 19 last year, according to senior officials regularly attending such meetings.

Meetings presided over by Dr Shaikh and also attended by Mr Umar included the Cabinet Committee on Energy and another of the Executive Committee of the National Economic Council (Ecnec). Umar was removed as finance minister in April 2019 and replaced by Dr Shaikh as PM’s adviser.

Asad confirms not attending ECC meetings chaired by finance adviser

The planning minister said the Planning Commission had lost its relevance and importance over the years in driving the country’s policy and planning direction, among other reasons, due to IMF programmes as the focus shifted to the Q-Block, the seat of Ministry of Finance. He said the prime minister wanted the commission to revive its past glory under the likes of Dr Mehbul Haq.

Therefore, the Planning Commission was finalising a set of new priority initiatives in addition to its usual role of project planning, approvals and so on. The new targets until June this year in this direction would include the launch of a three year Economic Growth Strategy 2021-23 on the directives of the prime minister as the government wanted to take the country towards growth momentum in next fiscal year. The planning commission’s revitalisation strategy would also be developed before June this year.

He said the project development, monitoring and evaluation system had weakened over the years and would be revamped by June 2020, followed by enhanced focus on SDGs implementation so as to improve the living standards of the people in line with international commitment. He said a summary had already been moved to the prime minister for creation of a national executive committee comprising the federal and provincial governments for effective monitoring.

Another six-month target include establishment of a Construction Industry Development Board (CIDB) at the Planning Commission for incentivising various services and expertise in the construction sector and ultimately shift it to the Ministry of Housing.

He said the Public-Private Partnership Authority (PPPA) had been a rudderless ship without relevant staff, rules and regulations and a full time chief executive and it would be fully operationalised within six months. He said he would like to ensure that government released the number of projects to be executed through the PPP mode along with their estimated cost as part of the next year budget as the PSDP details are released.

On China-Pakistan Economic Corridor, the minister said a new joint working group on science and technology would be created this year besides holding of Gwadar Expo 2020, initiation of incentive package for special industrial zones and ground breaking of Rashakai zone next month.

He said the two countries had agreed to facilitate third party participation in CPEC last year and a proper framework to actualise third party investments would be finalised before June besides creation of a business forum for interaction of businessmen under the CPEC framework.

Mr Umar said a recent report of the prime minister’s inspection commission revealed 191pc cost overruns of all projects on average which meant a Rs100m project was being completed at a cost of Rs291m due to 6-8 years of delays.

Responding to a question, the minister said the actual PSDP expenditure in first seven months has always remained between 21-28pc of the budget allocation since 2014-15 and full year utilisation ended up between 83-96pc except 2017-18 when it stood at 66pc.

Based on that ratio, he expected 100pc utilisation this fiscal year of Rs701bn allocation as 7-month actual expenditure stood at 27pc. He said a total of Rs188bn had been actually spent on the development projects this year as of end-January against Rs429bn authorised for disbursement by the Planning Commission. He said Rs87bn were utilised by the executing agencies by November and Rs101bn were disbursed since he assumed the planning portfolio.

Secretary Planning Zafar Hassan said about 1,034 projects were part of the ongoing PSDP and 171 of them would be completed by end-June 2020 this year.

Responding to a question on Main Railway Line (ML-1) from Karachi to Peshawar, the minister said the $9bn or Rs1,500bn worth of project required a serious due diligence because it involved a huge public money. He said he was himself a strong supporter of the developing railway infrastructure that had been neglected over the decades as a lot had already been invested in road sector.

He said the feasibility study of the project had been completed that had been shared with the World Bank for a review. He said the WB consultants would submit their report in the second half of current month on the basis of which the government would determine if the project structure being followed was advisable. He said the further progress on the project was expected by April this year.

Published in Dawn, February 8th, 2020