ISLAMABAD: Pakistan and the visiting IMF staff mission started discussions on the second and final review of the $3 billion short-term bailout package on a positive note on Thursday as the authorities assured full compliance with all the benchmarks.
A series of separate and combined sessions with the ministries of finance, energy and petroleum, the Federal Board of Revenue and the State Bank were held on the first day of formal talks, which are officially slated to end on March 18, with the authorities claiming to have completed all the benchmarks and qualitative performance indicators.
The dialogue started with the International Monetary Fund mission’s customary meeting with the newly appointed finance minister, Muhammad Aurangzeb Khan, who “welcomed the mission and expressed the government’s commitment towards working with IMF on the reform agenda for economic growth and stability of Pakistan”.
The minister has already made public the government’s decision to request another longer and larger loan programme to ensure macroeconomic stability and gradual journey to higher economic growth. To date, Pakistan has signed 23 IMF relief programmes.
The IMF side was led by its mission chief for Pakistan, Nathan Porter, who congratulated Mr Aurangzeb on his appointment.
“Discussions were held on the overall macroeconomic indicators, government’s efforts on fiscal consolidation, structural reforms, energy sector viability, and SOE (state-owned enterprises) governance,” an announcement said.
According to the Ministry of Finance, Pakistan has met all structural benchmarks, qualitative performance criteria and indicative targets (a total of 25 matrices) for successful completion of the IMF review. The ministry also expects a staff-level agreement on the conclusion of talks and the resultant disbursement of the final $1.1bn tranche after the IMF’s executive board approval.
Energy Minister Musadik Malik, who had a separate session with the IMF mission, assured that the government would meet the power sector’s circular debt target of Rs2.31 trillion as committed.
He told reporters that circular debt had stood at Rs2.31tr at the end of last fiscal year and this would not be allowed go beyond that amount on the completion of the current fiscal year on June 30. He said the government was on track so far and had actually beaten the target by a Rs15-20bn.
He said he assured the IMF mission that Pakistan would do energy sector reforms in all earnest in the interest of the coming generation, even if the lender wanted the country to do it or not.
Mr Malik said the government was working on measures to contain energy prices, as full costs are being passed on to consumers through tariff and it was now the authorities’ part to reduce generation costs and control losses and theft.
He said a plan was in the making to provide maximum local gas to four LNG-based power plants in Punjab, which were the most efficient plants in the world, but their energy cost was higher because they were run on expensive fuel.
He said the generation cost of these plants amounted to Rs22-24 per unit on LNG, which could be reduced to Rs12-14 if they were provided local gas and even lower at Rs6-8 per unit if gas was supplied to them on rates being charged to fertiliser plants.
He said a plan was now in the finalisation stage under which maximum allocation of local gas could be ensured for these LNG-based plants and introduce the full concept of weighted average cost of gas (Wacog) — the average price of local and imported gas.
The IMF mission was also briefed on the government’s plans to phase out gas supplies to captive power plants in favour of more efficient LNG-based facilities.
Published in Dawn, March 15th, 2024
