IMF program postponed!

The IMF program has been further postponed and the point of dispute is the improvement of anti-corruption regulations

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According to the most recent information, the IMF program has been further postponed, and this time the impasse is all about anti-corruption regulations, as well as other financial measures such as raising gas and electricity prices.

Except for the review of NAB laws, the government is willing to implement other financial measures.

Pakistan and the International Monetary Fund (IMF) are constantly working to reach an agreement on prior actions before going forward with a staff-level agreement, and one point of dispute is the improvement of anti-corruption institutional mechanisms.

Read more: IMF’s new conditions for Pakistan – “Do More”

The IMF wants to include it on the list of prior actions because the government failed to meet the Structural Benchmark (SB) stipulated by the PTI-led regime upon completion of the 6th review. The IMF is now vying to convert it into a new prior action for renewing the program.

Pakistan has requested the IMF to remove the strengthening of anti-corruption institutions from the list of prior acts, claiming that it is outside the Fund’s purview and mission. Prior initiatives are being discussed by Pakistan and the IMF in order to reach a staff-level agreement.

Pakistan will be required to carry out certain prior actions with effect from July 1, 2022, including the implementation of the Finance Act 2022, the enforcement of a petroleum levy, and the gradual increase in power tariffs. The Monetary Policy Committee will also meet on July 7 to tighten the monetary stance. With CPI-based inflation reaching 21.3 percent and the Wholesale Price Index reaching 38.94 percent, there is no doubt that monetary tightening is imminent.

Read more: IMF delivers targets ahead of restoring Pakistan’s bailout deal

Deregulating POL prices is part of the structural criteria for completing the next IMF program evaluations. There is now a point of conflict in that the IMF is requesting that anti-corruption measures be included as part of prior actions.

Upon sending a questionnaire to the IMF headquarters in Washington, DC, asking if the anti-corruption institutional mechanism is part of the prior actions for the completion of the 7th and 8th reviews under the EFF program, an IMF spokesperson responded, “Discussion with the Pakistani authorities on the review continue, and we do not comment on specific elements under discussion.” In general, increasing governance and transparency has been a prime focus of Pakistan’s EFF-supported program, as these ultimately underpin robust inclusive growth.

However, Pakistani authorities had no objections to the continuance of the Structural Benchmark (SB) for the establishment of a task force with input from specialists and civil society organizations to bolster the institutional framework for the aim of an anti-corruption campaign.  However, the IMF contended that Islamabad’s failure to reach the Structural Benchmark resulted in the imposition of prior actions because Islamabad committed to meet the SB in the last review but failed to meet the timeframe.

Attempts to strengthen governance and combat corruption remain critical. Pakistani authorities agreed with the IMF that one of their top priorities would be to increase the efficacy of anti-corruption agencies. Pakistani authorities agreed with the IMF that one of their top priorities would be to increase the efficacy of anti-corruption agencies. Pakistan will implement laws to develop a comprehensive electronic asset disclosure system (end-June 2021 SB, reset to end-January 2022) to improve transparency, accountability, and integrity in the public sector. It would also enable public access to annual declarations for all members (elected and unelected) of Pakistan’s federal government cabinet.

By the end of December 2021, a task force comprised of reputable international experts and civil society organizations will conclude a review of anti-corruption institutions’ institutional framework in order to improve their independence and effectiveness in investigating and prosecuting corruption cases, with recommendations for legislative amendments as appropriate. No doubt, the government could not fulfil its commitments and as a consequence IMF asked to incorporate it as a part of prior actions for renewing the program.