Staff Reporter
As the government begins implementing the International Monetary Fund’s (IMF) four
conditions for securing the third tranche of $540 million for Pakistan under the $6 billion Extended Fund
Facility (EFF) and removing structural imbalances, the first three months of the year 2020 will put
massive financial burden on the general public. According to the first condition, by the end of January, in
order to run private power companies at their full capacity for generating electricity, 25 percent of the
annual capacity charges amounting to about Rs40 billion will be charged to the consumers in the bills.
The total annual capacity charges are Rs155 billion. Likewise, a 214 percent hike in gas tariff will be
imposed, and stern measures will be taken to catch suspicious financial transactions. Electricity tariffs
are being raised to recover costs as IMF data showed that around one-third of the circular debt in 2018-
19 was due to distribution companies’ inefficiencies.National Electric and Power Regulatory Authority
(Nepra) and Oil and Gas Regulatory Authority (Ogra) are also needed to be empowered through
amendments to existing regulations to avoid delays in the issuance of tariff notifications. Under the
terms agreed for the second tranche of the IMF package, the government is required to apprise the
parliament about its income, expenditure and savings by February 28.Under the third condition, the
government is also required to introduce the state bank’s sovereignty bill in the parliament by March 31.
The bill will restrict printing of new currency notes for covering the fiscal deficit.According to the fourth
condition, the government will implement the two major provisions of the Financial Action Task Force
(FATF) under which banks will strictly monitor the transactions of their customers, and the bank secrecy
rules will not be applicable on the implementing agencies. On Dec 26, the IMF approved the second
tranche of $452.4 million while declaring that Pakistan’s reform programme “is on track and has started
to bear fruit”.The Fund, after completing its first review of Pakistan under the EFF, noted that "decisive"
implementation of government policies had helped preserve economic stability in the country. The
release of the second tranche accounted for the total amount granted by the IMF to $1,440 million. In a
press release, the IMF had noted that the "transition to a market-determined exchange rate has been
orderly [and] inflation has started to stabilise, mitigating the impact on the most vulnerable groups of
the population." The IMF had further observed that the "authorities remain committed to expanding the
social safety nets, reducing poverty, and narrowing the gender gap."At the same time, however, the
Fund had warned that "risks remain elevated". The press release had quoted IMF’s First Deputy
Managing Director and Acting Chair David Lipton as saying: "Strong ownership and steadfast reform
implementation are critical to entrench macroeconomic stability and support robust and balanced
growth.""The authorities are committed to sustaining the progress on fiscal adjustment to place debt on
a downward path," Lipton had said, adding that: "The planned reforms include strengthening tax
revenue mobilisation, including the elimination of tax exemptions and loopholes, and prudent
expenditure policies. Preparations for a comprehensive tax policy reform should start early to ensure
timely implementation." "The flexible, market-determined exchange rate remains essential to cushion
the economy against external shocks and rebuild reserve buffers," he had suggested. Lipton had also
pointed out that "faster progress [was] needed to improve the AML/CFT framework supported by
technical assistance from the IMF and other capacity development providers" in order for Pakistan to be
removed from FATF’s grey list.
