The closeness with which the IMF is monitoring, and some would even say supervising the government as a result of the Extended Fund Facility it has extended to Pakistan, can be seen in the way it is sending a team to Pakistan. There has been little attempt to hide the fact that the team is coming over because Pakistan has already missed certain key targets, such as the FBR’s failure to meet the revenue target and the provincial surplus target. A pet IMF project, the privitization of PIA, has also come a cropper. It has been stressed that this is not the review mission, which will be due in the next quarter, which means in January. The IMF team has come primarily to see what measures the government is putting in place to raise more revenue. In other words, it has come to see what is going to go in a mini-budget. While it has meetings lined up with the Finance Minister, the State Bank governor and the CBR chairman, the team will also meet the Energy Minister. This indicates the importance the IMF places on the circular debt, for which a management plan was recently unveiled, as well as the recent revocation of IPP contracts. The privatization of electricity distribution companies also hangs fire.
There is one nugget of information that the Pakistan government has in its favour. The decline in inflation, and the resulting cuts in the benchmark interest rate, mean that there has been a significant decline in debt servicing costs. That would make it correspondingly easier to manage the primary surplus the IMF demands. Though this team visit is not supposed to be a review visit, when that finally comes due, this visit will prove a useful reference.
At the same time, the government needs to think hard about its position, where now the IMF does not trust it to prepare minibudget without supervision. This indicates that the government’s claims of having achieved a turnaround are exaggerated. The positive indicators are not registering on the IM’s radar, and it remains mistrustful of the government’s promises. It has been let down before, and needs to consider seriously whether the conditions it imposes are so arsh that they cannot be fulfilled. The Ist budget, which included all the IMF’s conditions, has bot worked. The coming visit is thus a sign of the IMF’s failure rather than of the government’s.
