'No hurdles in IMF agreement'
The central bank governor, Jameel Ahmad, said on Thursday that there was no hurdle from the State Bank of Pakistan (SBP)'s side in reaching a staff-level agreement with the International Monetary Fund (IMF), and any outstanding issues might be related to the federal government.
While talking to the media after a meeting of the Public Accounts Committee (PAC), the governor hoped that the staff-level agreement would be reached very soon with the IMF. However, he did not provide a firm date for the deal, which has been overdue since March 14.
The PAC meeting also revealed that the federal government was about to give "emperor-like powers" to Federal Finance Minister Muhammad Aurangzeb to approve up to five special honoraria for employees and officers of various government departments.
"There is no issue pending with us, and any outstanding issue might be on the part of the federal government," said Jameel Ahmad while responding to a question about the timing of the staff-level agreement with the IMF. The governor did not specify any particular issue but stated that finalising matters with ministries and divisions takes time.
Pakistan and the IMF held talks from March 3 to 14, but both sides could not reach a staff-level agreement due to delays in finalising the Memorandum of Economic and Financial Policies (MEFP). After the mission returned to Washington, the Ministry of Finance held at least two virtual sessions with the IMF in the presence of other stakeholders.
The IMF and Pakistan are in the process of finalising the MEFP in the areas of trade and taxes, along with fiscal and circular debt numbers. The federal authorities remain hopeful that the agreement will be reached soon. According to the IMF Board's schedule, the first programme review and the end-December 2024 performance and continued criteria must be completed by March 15.
"The IMF and Pakistani authorities made significant progress toward reaching a staff-level agreement on the first review under the 37-month Extended Arrangement under the Extended Fund Facility (EFF)," said Nathan Porter, the IMF Mission Chief, after the talks last week.
The smooth continuation of the programme is critical to ensuring uninterrupted rollovers of foreign debts by four bilateral creditors: Saudi Arabia, the United Arab Emirates, China, and Kuwait.
The SBP governor stated that the IMF had "substantially reduced" the current account deficit projection for the current fiscal year during the recent review talks. At the time of finalising the $7 billion deal last year, the IMF had estimated the current account deficit at $3.6 billion or 0.9% of GDP for the current fiscal year.
The governor neither confirmed nor denied whether the IMF has now projected the current account deficit target at around $400 million or 0.3% of GDP for this fiscal year. He said that the next fiscal year's target has not yet been finalised.
During the talks, the IMF wanted to keep the current account deficit high, assuming that an increase in foreign exchange reserves would help build external sector buffers.
The central bank's reserves remained flat at $11.1 billion by the end of last week, barely enough to finance a little over two months of imports.
When asked, the governor said that the IMF is also revising inflation and economic growth projections. He noted that the central bank expects economic growth to remain around 3% during the current fiscal year.
He highlighted the significant growth in foreign remittances and expressed hope that they would remain above $36 billion this fiscal year.
PAC proceedings
Headed by PTI's Junaid Akbar, the PAC discussed audit objections related to the finance ministry and expressed dissatisfaction over the nation's financial management. PAC members repeatedly pointed out poor budgeting and weak fiscal discipline by the Ministry of Finance during the fiscal year 2022-23.
On an audit objection regarding the payment of Rs241 million in honoraria to finance ministry employees without any policy, Finance Secretary Imdadullah Bosal disclosed that a new honoraria policy would soon be approved by the federal cabinet.
However, the policy's framework indicated that discretionary powers over honoraria distribution would continue. Bosal said that the Economic Coordination Committee (ECC) of the Cabinet had approved the honoraria policy in June 2022, but the federal cabinet had not yet granted approval.
According to the proposed policy, the federal secretary can award one month's salary as a bonus to all employees and an additional salary to 25% of the total employees. Two special honoraria can also be granted.
However, Bosal stated that the ECC chairman, who is also the finance minister, would have the authority to grant up to five months' salaries as "special honoraria."
Committee members criticised these discretionary rewards, comparing them to the lavish gifts given by Mughal emperors. They argued that such powers should not be included in the policy.
Bosal noted that 60 departments receive budgeted honoraria, not just the finance ministry.
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