US to release $2.5bn CSF arrears, ministry assures senate body

IMFISLAMABAD: Ministry of Finance on Tuesday assured the Senate Standing Committee on Finance the release of $2.5 billion Coalition Support Fund arrears from United States, $800 million PTCL privatisation proceeds and auction of 3-G licenses fetching Rs 75 billion to help Pakistan manage economy well after decision for not seeking fresh International Monetary Fund (IMF) loan programme.

Dr Waqar Masood, Secretary Finance, presented a comprehensive strategy for economic management without IMF support in the ongoing fiscal year 2011-12 by citing exports and remittances, expenditure management, resource mobilization and continuation of reforms to help maintain discipline and restore confidence of lending institutions.Briefing the Senate Standing Committee on Finance here at the parliament house Secretary Finance informed that Pakistan had signed a Stand-By-Arrangement (SBA) with IMF for $7.6 billion in November 2008. The amount was subsequently enhanced to $11,332 billion. IMF has so far disbursed $7,425 billion. Additionally, an amount of $452.5 million under the Emergency Natural Disaster Assistance (ENDA) framework was also disbursed after the floods of 2010.

Although the SBA has come to an end and undoubtedly not all the targets and objectives of the programme have been achieved but Pakistan considers that the programme has been instrumental in extricating the economy from the grave dangers it faced in October 2008.The economy at present faces challenges but it is not in the dire straits that initially warranted the SBA. While some of the reforms relating to revenue growth and power sector fell short of the targets, key achievements pointing towards relative stability of the economic framework including unprecedented high levels of foreign exchange reserves, stable exchange rate, exceptional growth, performance in exports and remittances, inflation containing from the high of 25 percent to about 10.4 percent at present.

Secretary Finance informed the committee that Pakistan is not keen on seeking a new programme at this stage. This decision is based on the assessment of this year’s balance of payments position, which appears under no pressure, despite repayment of $1.2 billion this year.However, this does not mean that Pakistan would in any way conduct its economic management without the constraints and discipline stipulated within a programme framework. For this purpose a monitoring framework has been developed, which tracks on weekly, monthly and quarterly basis all key indicators relevant in a programme framework.

Pakistan is keen to hold Article-4 Consultations with IMF around November 2011. As we move forward we will closely watch the developments in the economy and if needed possibilities of starting a new Programme will be carefully assessed and acted upon accordingly.Dr Khan further informed that United States has reacted to $2.5 billion Coalition Support Fund clearance request positively and there is no negative indication from US side.He said that Ministry of Finance is awaiting response from financial advisor for floatation of Exchangeable Bonds and in case this did not materialized during ongoing fiscal year, some other products that are under consideration would be introduced for resource availability.

Dr Khan informed that yesterday Federal Interior Minister Rehman Malik and he himself were in Dubai and held extensive talks with Etisalat and issues have been resolved and release of $800 million PTCL privatisation arrears is expected within this fiscal year.He also informed that Pakistan is going to auction 3-G licenses to telecommunication companies and some Rs 75 billion realization is expected within this fiscal year.He said that despite non-availability of Letter from IMF for programme loans from Asian Development Bank and the World Bank, Pakistan has agreed with these international financial institutions that it would propose projects for fast track disbursement out of $2 billion collective allocation within this fiscal year.

He assured the Senators that Pakistan economy would successfully survive without going for fresh IMF loan programme and after payment of $1.2 billion to IMF in ongoing fiscal year Pakistan’s foreign exchange reserves would not come down from $17.3 billion by June 30, 2012.He also categorically said that not opting IMF programme doesn’t mean that Pakistan would partway from reforms. IMF, WB and ADB have been assured that reforms to continue, and there would be no change in such reforms and government to continuously observe fiscal discipline in future.Pakistan would continue to seek advice and guidance from IMF and there would be Article IV consultation with IMF in November 2011 after the decision for not taking fresh IMF loan programme, he added.

During IMF mission’s visit to Islamabad, Ministry of Finance would arrange a seminar in which IMF authorities would like to hear from stakeholders including parliamentarians that what kind of relations Pakistan intends to maintain with IMF in future.They were informed that the senators that old and new circular-debt have burdened the economy with Rs 580 billion including Rs 280 billion circular debt parked in government Holding Company and newly emerged Rs 280-300 billion circular debt.The government has agreed reforms with the WB and ADB for permanent elimination of circular debt and ADB is actively considering helping Pakistan to over come this issue. – Dailytimes