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National

December 6, 2017

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Pakistan starts briefing IMF on proposed privatisation plan

ISLAMABAD: Pakistan and the IMF have kick-started parleys here under Post Programme Monitoring (PPM) in which Islamabad authorities briefed the Fund about proposed privatisation plan including selling of SME Bank and Mari Petroleum within the tenure of the incumbent regime.

Pakistan has deliberately delayed these PPM talks as it were due few months back but the concerned authorities wanted to accomplish launching of Sukuk and Eurobond first through which Islamabad had now raised $2.5 billion last week. “The launching of bonds and raising of $2.5 billion has restored our confidence and we will be able to share our future strategy to bridge the financing gap on external account of $10 to $15 billion,” they added.

The IMF team intends to raise questions about fixing rising twin deficits including the fiscal deficit and current account deficit during their stay in Pakistan. “One key and important question will be raised regarding much neglected power sector governance reforms as the supply side improved by adding generation capacity but this increased capacity will lead to rising monster of circular debt,” said the sources and added that IMF would ask Pakistani authorities about measures to curb piling up of circular debt beyond imaginative levels.

“The IMF team has started 7 to 10 days parleys with Pakistani authorities here in Islamabad in order to gauge the economic health of the country on the basis of which the Fund staff will prepare its draft report which will be made public after getting approval from its Board,” said the official.

However, independent economist including Dr Ashfaque Hassan Khan made an assessment that Pakistan would be requiring $26.5 billion gap in the current fiscal year against $17 billion projected by the World Bank. According to Dr Ashfaque’s estimates, the current account deficit could peak to $18 billion and debt servicing requirement would be standing at $8-$8.5 billion so total financing requirement could touch to $26 billion. However, the traditional foreign inflows would be hovering around $12 billion so remaining $16 billion would remain big challenge for the country’s economy, he added. Regarding PPM, when a member country borrows money from the IMF, its policies come under closer scrutiny. Once a country has completed its lendings programme, it may be subject to Post-Programme Monitoring (PPM), which is an important part of the Fund’s safeguard architecture. PPM is generally expected for all member countries that have substantial IMF credit outstanding following the expiration of their programmes. The aim is to identify risks to such member countries’ medium-term viability and provide early warnings on risks to the Fund’s balance sheets. Should it become necessary, IMF staff will advise on policy actions to correct macroeconomic imbalances.

IMF financing provides member countries with the breathing space they need to correct their balance of payments problems. A policy programme supported by IMF financing is designed by the national authorities in close cooperation with the IMF. Continued financial support during the programme is conditional on the effective implementation of the policies. A country’s return to economic and financial health during the programme and in the medium term ensures that IMF funds are repaid, and can be made available to other member countries. Post-programme monitoring helps support this process.

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