IMF review: MOF takes step towards ensuring desired outcome

Second review under IMF s $3 billion Stand-By Arrangement (SBA) is expected to take place in February 2024

ISLAMABAD: Ministry of Finance (MOF) has asked all Ministries/ Divisions and entities to meet commitments made with the International Monetary Fund (IMF) within the stipulated time to ensure successful completion of the review.

Secretary Finance, Imdadullah Bosal, has communicated to all Ministries, Divisions, and entities regarding the second review under the Stand-By Arrangement (SBA), scheduled for February 2024.

The imperative nature of meeting commitments, including Structural Benchmarks, Quantitative Performance Criteria, and other obligations for the 2nd Quarter, as agreed with the IMF, has been emphasized.

The Memorandum of Economic and Financial Policies (MEFP) with the IMF outlines specific requirements for each Ministry, Division, Organization, and Wing.

Notably, NEPRA and Power Division are tasked with submitting updates on spending containment, especially in limiting energy subsidies.

This aligns with the cabinet-approved update of the circular debt management plan for FY24 by end-July 2023.

The reform includes a focus on tube-wells for large agricultural users in Punjab, Sindh, and Khyber-Pakhtunkhwa provinces, with the first phase removing government subsidies.

The subsequent phases aim to eliminate cross subsidies and explore options to replace agriculture tube-well subsidies in Baluchistan.

Authorities assure the IMF of accelerating programmed structural reforms with support from the World Bank, ADB, and other donors.

Efforts include reducing losses, improving governance and PPA terms, increasing competition, reducing generation costs, and greening the energy mix in FY24.

They commit to continuing negotiations on Power Purchase Agreements (PPAs) and settling arrears for IPPs and Government Power Producers (GPPs).

The Finance Ministry seeks updates on commitments, including creating fiscal space, settling due amounts, and improving efficiency in Distribution Companies (Discos).

Measures include initiating work on prerequisites for transactions and enhancing anti-theft efforts.

Noteworthy reforms also involve accelerating the green energy transition, submitting plans for Integrated System Planning, and seeking NEPRA’s approval for the Commercial Code to enhance efficiency in the wholesale market.

Importantly, the Authorities pledge to refrain from certain financial practices, such as netting out cross-arrears, using “non-cash” settlements, and issuing government guarantees.

Special audits of key SOEs (SSGCL, HESCO, and PESCO) have been requested, with line Ministries defining scopes and terms of reference.

Both the Power Division and Auditor General are expected to provide updates on the progress of these commitments made with the IMF by the end of FY24.

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