News
Wednesday, April 20, 2011
IMF links fresh loan with completion of SBA
* IMF tells Pakistan to first improve credibility and implement four types of performance benchmarks or reforms agreed under $11.3 billion SBA
By Sajid Chaudhry
ISLAMABAD: For improvement in credibility, the International Monetary Fund (IMF) has linked the fresh loan programme with successful completion of the ongoing $11.3 billion Stand-By-Arrangement (SBA) for Pakistan, official sources said on Tuesday.
In case the government is able to successfully complete the current SBA, there is a possibility that the IMF will propose a front loan programme to Pakistan under which the government would be required to implement all the performance benchmarks at first to receive the loan proceeds. During the recently concluded talks with IMF and World Bank authorities at the sideline of the Spring 2011 meeting, IMF authorities had asked Pakistan’s economic team to first improve the credibility and implement four types of performance benchmarks or reforms agreed under the $11.3 SBA.
The reforms that the government has failed to implement under the SBA are broader tax reforms, including introduction of broad based integrated reformed general sales tax on goods and services, elimination of power subsidy and reforms of the power sector for ensuring sustainable public sector entities growth, limiting borrowing and expenditure management as well as passage of the State Bank of Pakistan Act for its autonomy.
The sources said the IMF had suggested to Pakistani team that successful completion of the $11.3 billion SBA would enable IMF authorities approach their executive board for obtaining permission for negotiating fresh loan programme for Pakistan.
In case the government is able to implement the said four performance benchmarks in the upcoming budget 2011-12, there would be a scope for negotiating a fresh loan programme. The sources said that Pakistan’s foreign exchange reserves for the time being were at comfortable level and the government was not pressing IMF authorities to release the remaining sum of $3.6 billion out of the total $11.3 billion SBA. However, economic managers are more interested in revival of the suspended SBA as this would restore “Letter of Comfort” facility from the IMF.
The sources said that it would be a challenging task for the government to achieve the fiscal deficit and inflation targets of 5.5 percent around 15 percent for the current fiscal year.
Courtesy www.dailytimes.com.pk