IMF Sets 10 Structural Benchmarks for Pakistan to Fulfil Bailout Criteria

The International Monetary Fund (IMF) has set ten Structural Benchmarks (SBs) for stand-by arrangement (SBA) including not granting further tax amnesties as well as avoiding the practice of issuing new preferential tax treatments or exemptions.

The Fund in its latest country report on Pakistan stated that program performance will be monitored through quantitative performance criteria (QPCs), indicative targets (ITs), SBs, and quarterly reviews, including the regular assessment of financing commitments to ensure the program remains fully financed.

The Fund had set two prior actions including

• Parliamentary approval of the fiscal year 2024 budget in line with IMF staff agreement to meet program targets.
• Withdrawal of the circular on prioritization in providing FX for certain types of imports introduced in December 2022, with the purpose of ensuring full market determination of the exchange rate. Both prior actions were met, the report noted.

The report noted three Structural Benchmarks on fiscal including (1) committing to not grant further tax amnesties (continuous),  (2) avoiding the practice of issuing new preferential tax treatments or exemptions (continuous), (3) issuance by the Central Monitoring Unit (CMU) of its first periodic report on the performance of SOEs, using latest available data, to the federal government (end-Dec. 2023).

For the social sector, the Fund has sect one SB including inflation adjustment of the unconditional cash transfer (Kafalat) (end-Jan. 2024).

On Monetary and Financial, IMF has set two SB (1) the average premium between the interbank and open market rate will be no more than 1.25 percent during any consecutive business day period (continuous), (2) submission to parliament of amendments to align Pakistan’s early intervention, bank resolution, and crisis management arrangements with international good practices, in line with IMF staff recommendations (end-Dec. 2023).

The fund has set two SB on the Energy Sector and State-Owned Enterprises (notification of the annual rebasing (AR) for the fiscal year 2024 to take effect on July 1, 2023 (end-Jul. 2023), (2) improve state-owned enterprise (SOE) governance by:

1. operationalizing the recently approved SOE law into a policy that clarifies ownership arrangements and the division of roles within the federal governments, and
2. amending the Acts of four selected SOEs to make the new SOE lawfully applicable to those SOEs (end-Nov. 2023).

On Climate, one SB is set i.e. Cabinet adoption of a Climate-PIMA and PIMA action plan (end-Dec. 2023). On Economic Statistics one SB is set i.e. compilation and dissemination of Quarterly National Accounts for FY24Q1 and revised annual estimates for fiscal year 2023 (end-Nov. 2023).

The Fund has set four indicate targets:

1. Cumulative floor on general government budgetary health and education spending — Rs. 465 billion (end-September end-December 2023) and — Rs. 1,031 billion (end-December 2023),
2. Floor on net tax revenues collected by the FBR–Rs. 1,977 billion (end-September end-December 2023) and Rs. 4,425 billion (end-December 2023),
3. Ceiling on the net accumulation of tax refund arrears –Rs. 32 billion (end-September 2023) and Rs. 43 billion (end-Dec. 2023)
4. Ceiling on power sector payment arrears Rs. 155 billion (end Sept.2023) and Rs. 64 billion (end Dec.2023).

The Fund has set two continuous Performance Criteria including (1) Zero new flow of SBP’s credit to the general government and (2) Zero ceiling on the accumulation of external public payment arrears by the general government.

The fund has set seven quantitative performance criteria:

1. Floor on net international reserves of the SBP –$14,550 billion (end Sep. 2023) and $13,800 billion (end Dec. 2023),
2. Ceiling on net domestic assets of the SBP –Rs. 15,048 billion (end Sep. 2023) and Rs. 14,888 billion (end Dec. 2023),
3. Ceiling on SBP’s stock of net foreign currency swaps/forward position –$4,200 (end Sep. 2023) and $4,000 billion (end Dec. 2023),
4. Ceiling on net government budgetary borrowing from the SBP –Rs. 4,708 billion (end Sep. 2023) and Rs. 4,708 billion (end Dec. 2023),
5. Ceiling on the general government primary budget deficit –Rs. 87 billion (end Sep. 2023) and Rs. 1,232 billion (end Dec. 2023),
6. Ceiling on the amount of government guarantees –Rs. 4,000 billion (end Sep. 2023) and Rs 4,050 billion (end Dec. 2023),
7. Cumulative floor on targeted cash transfers spending (BISP) –Rs. 87.5 billion (end Sep. 2023) and Rs. 185.5 billion (end Dec. 2023).