The federal government’s new austerity measures will save Rs16.8 billion, while Pakistan has missed several conditions under its International Monetary Fund (IMF) programme, including targets for health and education spending, sugar-sector liberalisation and amendments to laws governing the Sovereign Wealth Fund (SWF) and state-owned enterprises, a media report has said.
Finance Secretary Imdad Ullah Bosal, who is also the government’s chief negotiator with the IMF, briefed the National Assembly Standing Committee on Finance on Thursday on the implementation of the IMF programme after two years.
Bosal said that the overall implementation of the programme remained “pretty strong”, which he said had helped Pakistan reach staff-level agreements with the IMF without many difficulties in previous reviews.
He stated that the government’s decision to reduce fuel allocations for official vehicles by 50 percent will save Rs700 million during the three-month implementation period. A five percent reduction in non-salary expenditure for one year will generate another Rs16.1 billion in savings.
Prime Minister (PM) Shehbaz Sharif announced the austerity measures after public criticism over the government’s decision to pass on the financial burden of the Middle East war to consumers.
During the briefing, Bosal shared implementation details from the previous three IMF reviews but did not provide the final status of conditions for the fourth review because discussions with the IMF are still ongoing. He did, however, provide the final status of some conditions.
Bosal told the committee that three provinces had agreed to sugar-sector liberalisation, while one province had reservations. He did not name the province, but a committee member identified it as Sindh.
Bosal stated that the government was holding discussions with the province to address its concerns.
Under the IMF condition, the federal and provincial governments must agree on and the federal cabinet must adopt a national policy for sugar-market liberalisation. The policy covers licensing, price controls, import and export permissions, zoning and timelines for implementation.
The government had to approve the policy by June this year, but it has not met the condition.
The government continues to exercise controls over sugar imports and exports, recently allowing the export of 308,000 metric tons of sugar.
The finance ministry told the committee that the government was working towards full liberalisation of the sugar sector and had shared draft recommendations for a national policy with the provincial governments.
The IMF also required the government to collect agricultural income tax from landlords and farmers, but implementation remains slow. The IMF held a meeting with the Sindh government on Thursday to review progress on the condition.
Committee Chairman Syed Naveed Qamar stated that the traders’ scheme and agricultural income tax scheme faced the same issue, arguing that increasing the tax rate on agricultural income from 15 percent to 45 percent had not resulted in greater tax compliance.
Bosal stated that the government also missed the IMF-linked targets for health and education spending because of some provinces, making the issue a recurring concern during programme reviews.
The target required the five governments to spend Rs3.47 trillion on health and education during the last fiscal year. They spent Rs3.1 trillion.
Bosal linked the shortfall in part to the Federal Board of Revenue (FBR) missing its tax collection targets, saying that the federal government then had to ask the provinces to reduce their expenditure.
The committee also discussed the government’s failure to make civil servants’ asset declarations public. Qamar said that the federal government was delaying the publication of the declarations.
Bosal also said that the government will fully implement the condition by December this year.
The committee decided to seek a briefing from the Establishment Division and the FBR on asset declarations.
Pakistan also missed the IMF condition requiring amendments to the Sovereign Wealth Fund Act and other legislation to introduce governance mechanisms and safeguards in line with international standards and practices.
Finance Special Secretary Qumar Abbasi said that the existing law allows the SWF to retain 50 percent of dividends from companies. Under the proposed change, the income will first go to the government, which will then decide whether to distribute any part of it.
The government also failed to meet a condition requiring amendments to the laws of nine additional statutory State-Owned Enterprises (SOEs) to bring them in line with the SOE Act.
