Pakistan Misses Three Out Of Five IMF Targets Before Second Review

Pakistan has missed three out of the five targets set by the International Monetary Fund for the second review of the $7 billion bailout package, a media report said on Wednesday.

According to a fiscal operations summary released by the Ministry of Finance, the provinces fell short of saving the targeted PKR 1.2 trillion in the last fiscal year, which ended in June, due to a rise in expenditures, The Express Tribune newspaper reported.

The Federal Board of Revenue also missed its two key conditions of collecting PKR 12.3 trillion in total revenues and PKR 50 billion from retailers under the Tajir Dost Scheme during the last fiscal year.

However, Pakistan managed to meet an important target of generating a primary budget surplus of PKR 2.4 trillion along with the total revenues collected by the four provinces.

This is the second consecutive year of primary surplus and the highest in 24 years, surpassing the IMF target.

The Finance Ministry tried hard to stay on the fiscal path, but the setback came from the provincial capitals, which were not under the control of the federal government, the report said.

The overall fiscal deficit also reduced to 5.4% of GDP or PKR 6.2 trillion, which was well below both the original target of 5.9%. The finance secretary kept a tight check on the expenditure throughout the fiscal year.

The IMF has set about 50 conditions overall under the $7 billion bailout package - some of those are monitored on a quarterly and annual basis and are linked with the approval of the loan tranches.

The government has managed to achieve relative fiscal stability, but the official data showed that the federal government's net revenues were still PKR 1.2 trillion less than its needs for just two heads: interest payments and defence spending. The rest of the expenditures are incurred by taking more loans.

Against a primary surplus target of PKR 2.4 trillion, the federal government reported a surplus of PKR 2.7 trillion, or 2.4% of gross domestic product, according to the ministry.

The provincial governments had given the understanding to the IMF and the federal government to generate PKR 1.2 trillion cash surpluses. However, the four provinces collectively generated a cash surplus of PKR 921 billion, missing the IMF target by PKR 280 billion.

The FBR failed to collect any significant revenue under the Tajir Dost Scheme against the target of PKR 50 billion for the last fiscal year.

Despite these shortfalls, the government is unlikely to face serious hurdles during the upcoming review talks — expected to begin next month — for the release of the next $1 billion tranche, due to progress on other critical benchmarks, the report said.

The $7 billion package was agreed last year, and it has been instrumental in stabilising the economy of the country.