- What price this time?
There has been a staff-level agreement between the International Monetary Fund (IMF) and the Pakistan government over the second review of the Extended Fund Facility (EFF), which means that the IMF will issue the $450 million second tranche of the $6 billion EFF. The money has not yet been disbursed, which will happen only after the IMF Executive Board gives its approval in April. However, it has not been made known what exactly are the additional requirements of the IMF, if any, that Pakistan has agreed to. Pakistan has already gone through considerable economic disturbance because it fulfilled the IMF’s requirements even before it agreed to the EFF a year ago.
The government seems to have succeeded in convincing the IMF that the original agreement went too far, but there has been no real indication that the IMF has budged any further on the revenue collection target, and it hopes that the easing in world oil prices will allow some room for adjustment, which will be reflected in the next budget. The IMF demand for further gas and electricity tariff increases was not accepted, because the government argues that it was not politically acceptable.
An illustration of this political pressure may be seen in the National Assembly Finance Committee’s summons to PM’s Finance Adviser Dr Abdul Hafeez Sheikh to brief it on certain key finance bills, before it would approve them. The committee has already rejected one of the five bills, which the government wants passed because they meet either IMF conditionalities or Financial Action Task Force requirements. The Committee, which is chaired by a PTI member, also wants to be in on the action on inflation, and has summoned State Bank Governor Baqir Raza so that it can be briefed on the issue. As the 2018 elections recede into the distance, and fresh ones loom increasingly larger, even Treasury members will feel the heat emanating from the government’s agreement with the IMF. It is no coincidence that Dr Sheikh and Dr Baqir are both non-elected, and thus do not have any fear from the next election, unlike the committee members they will meet.